WELLINGTON: New Zealand’s central bank has unexpectedly kept its key interest rate unchanged, citing global uncertainty that is weighing on domestic demand, in a split decision that has sent the Kiwi dollar tumbling.
The Reserve Bank’s (RBNZ) Monetary Policy Committee held the Official Cash Rate at 2.75% yesterday in Wellington, as expected by just two of 25 economists surveyed by Bloomberg.
The remainder anticipated a quarter-point hike.
“Members differed in how much weight they placed on various risks and the timing of the monetary policy response,” the RBNZ said.
“The committee agreed that tighter monetary policy is likely to be required but remains conditional on the economic outlook.”
The pause after back-to-back hikes in the third quarter signals policymakers remain cautious over how aggressively they should battle inflation, particularly as the economic recovery remains fragile.
Most economists expect the RBNZ will raise rates sooner rather than later, with the next opportunity in December, an option the committee left open.
“If domestic pricing pressures fail to moderate sufficiently or broaden beyond what costs and normal pass-through can explain, this could warrant further tightening,” the central bank said.
“On the other hand, subdued pricing pressures could require holding at future meetings.” The New Zealand dollar slid as much as 1.7% to 55.86 US cents immediately after the decision. — Bloomberg
