If you had been reading the comments of economists and other ‘experts’ there was a good chance the Reserve Bank of NZ may have 1) lifted rates today, or 2) moved closer to a rate rise later in the year. The RBNZ sat pat (like the Reserve Bank in Australia) and issued a statement which at times read like the one issued by RBA Governor Phil Lowe.
“Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time,” he concluded Tuesday’s statement
This morning RBNZ governor grant Spencer said in the final paragraph of his statement:
"Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.”
So much for the RBNZ looking at a rate rise!
Mr Spencer made it clear that the central bank will accommodate the improvement in the economy, eventually. In the meantime it has cut its short-term forecasts for the NZ economy
“GDP growth eased over the second half of 2017 but is expected to strengthen, driven by accommodative monetary policy, a high terms of trade, government spending and population growth.
"Labour market conditions continue to tighten. Compared to the November Statement, the growth profile is weaker in the near term but stronger in the medium term.
"The Bank has revised its November estimates of the impact of government policies on economic activity based on Treasury’s HYEFU. The net impact of these policies has been revised down in the near term. The Kiwibuild programme contributes to residential investment growth from 2019.
"House price inflation has increased somewhat over the past few months but housing credit growth continues to moderate.
“Annual CPI inflation in December was lower than expected at 1.6 percent, due to weakness in manufactured goods prices.
"While oil and food prices have recently increased, traded goods inflation is projected to remain subdued through the forecast period. Non-tradable inflation is moderate but expected to increase in line with increasing capacity pressures.
"Overall, CPI inflation is forecast to trend upwards towards the midpoint of the target range. Longer-term inflation expectations are well anchored at 2 percent,” Mr Spencer said.
In fact this statement would to have looked out of place coming from Dr Lowe, and his statement on Tuesday would not have looked odd being issued this morning by mr Spencer.
