RBNZ keeps OCR on hold and retains easing bias, likely to cut rate in June

New Zealand’s central bank, RBNZ, kept the OCR on hold at 2.25% and retained a clear easing bias. It stated that “further policy easing may be required”. This was on par with projections, said ANZ. The monetary policy statement was slightly less dovish in April from March. The central bank is still upbeat about the New Zealand’s economic outlook. It sees risks on the downside as well as on the upside to the economic outlook. The RBNZ stated that house price growth in Auckland has recently risen, instead of moderating.

However, the statement still had quite of a dovish tone. The central bank continues to be wary of global economic outlook. It stated that global growth has declined in recent months. Also, it remains worried regarding lower inflation expectations. Furthermore, the central bank’s language was quite direct regarding currency. The RBNZ nearly played down the NZD’s recent stabilization. Meanwhile, it kept the same tone for housing. It continued to be wary of inflation outlook despite signs that the core inflation has stabilized or is accelerating.

The RBNZ is likely to lower the OCR in June, according to ANZ. However, this is a line-ball call, added ANZ. The reasons for lowering the rate continue to exist, such as low inflation expectations, possibility of renewed financial market turbulence, dairy market, and funding cost pressures. However, when weighed against the reasons such as stabilization of core inflation, clear re-leveraging behaviour, upbeat housing market and domestic economy functioning near trend, the view remains that further easing might not be much favorable for the economy, said ANZ.