Today, the Monetary Policy Committee of the Reserve Bank of New Zealand has decided to keep the Official Cash Rate (OCR) at 5.50%. This interest rate has impacted economic activity by slowing economic growth and reducing inflationary pressures as needed.

Although GDP growth was stronger than expected in the June quarter, demand growth in the economy continues to show a decline. With monetary conditions still tight, the forecast for economic spending growth has been revised lower.

Globally, economic growth remains below trend, and general inflation has decreased in most of our trading partners. While core inflation has also decreased, it remains at a lower level. Weaker global demand has put pressure on the volume and prices of New Zealand's exports. Global import prices have also declined.

Although the imbalance between supply and demand continues to slow in the New Zealand economy, a prolonged period of subdued activity is necessary to reduce inflationary pressures.

There is a short-term risk that economic activity and inflation levels may not slow down as expected. In the medium term, a more significant slowdown in global economic demand, especially in China, could put pressure on commodity prices and New Zealand's export income.

The Committee has agreed that the Official Cash Rate needs to be maintained at a tight level to ensure that annual consumer inflation returns to the target range of 1 to 3%, as well as to support the creation of as many sustainable jobs as possible.

The Monetary Policy Committee has discussed the latest developments in the New Zealand economy. They agreed that monetary conditions are restricting spending and reducing inflationary pressures. Although supply constraints in the economy are continuing to ease, inflation levels remain high. Therefore, spending must continue to be managed to align with the economy's capacity to supply goods and services, so that consumer inflation can return to the target range set.

At the global level, economic activity is still below trend. Although global economic growth has been relatively strong in recent months, this momentum is starting to weaken. Recent data shows ongoing regional variations, with the United States experiencing strong growth, while Europe and China are facing challenges with slowing growth. The decline in global demand is impacting New Zealand's exports, both in terms of volume and price. Global oil prices have risen, but other import prices have been slightly lower.


Warning!

This analysis is based on fundamental and technical perspectives from reliable sources, and it is not intended as advice or an invitation to act. Always remember that this content aims to enrich the reader's information. Always conduct independent research regarding other forex information to serve as a reference for your trading decisions.

 

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