OCR and MPS: What the Governor said

Thursday 10 August 2017

The Reserve Bank has left the official cash rate at 1.75%, and says is it likely to stay there for "a considerable period". Here is what the governor, Graeme Wheeler said.

The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 1.75%.

Global economic growth has become more broad-based in recent quarters.  However, inflation and wage outcomes remain subdued across the advanced economies, and challenges remain with on-going surplus capacity.  Bond yields are low, credit spreads have narrowed and equity prices are at record levels.  Monetary policy is expected to remain stimulatory in the advanced economies, but less so going forward.

The trade-weighted exchange rate has increased since the May Statement, partly in response to a weaker US dollar. A lower New Zealand dollar is needed to increase tradables inflation and help deliver more balanced growth.

GDP in the March quarter was lower than expected, adding to the softening in growth observed at the end of 2016.  Growth is expected to improve going forward, supported by accommodative monetary policy, strong population growth, an elevated terms of trade, and the fiscal stimulus outlined in Budget 2017.

House price inflation continues to moderate due to loan-to-value ratio restrictions, affordability constraints, and a tightening in credit conditions.  This moderation is expected to persist, although there remains a risk of resurgence in prices given continued strong population growth and resource constraints in the construction sector.

Annual CPI inflation eased in the June quarter, but remains within the target range.  Headline inflation is likely to decline in coming quarters as the effects of higher fuel and food prices dissipate.  The outlook for tradables inflation remains weak.  Non-tradables inflation remains moderate but is expected to increase gradually as capacity pressure increases, bringing headline inflation to the midpoint of the target range over the medium term.  Longer-term inflation expectations remain well anchored at around 2%.

Monetary policy will remain accommodative for a considerable period.  Numerous uncertainties remain and policy may need to adjust accordingly.

Comments from our readers

No comments yet

Sign In / Register to add your comment

Property News

Limited impact from foreign buyer ban - REINZ

The upcoming foreign buyer ban on purchasing existing properties is expected to have a minimal impact on sales, according to new research from the Real Estate Institute of New Zealand (REINZ).

House Prices

Post-election bounce back

House prices in all but one of New Zealand’s 15 regions increased year-on-year in November, according to Trade Me Property’s latest data.

Commercial

Top 10 predictions for 2018 - Colliers

Investors who are wondering what 2018 will hold in the commercial property sector might find some clues in Colliers International New Zealand’s latest list of predictions.

Site by PHP Developer