NZD interest rate at the same level
Board members of the New Zealand Reserve Bank decided to leave at a record low of 0.25% in May, unanimously as expected. RBNZ will also maintain the size of its quantitative easing program at NZD100 billion.
Funds for the lending program remain unchanged, the Central Bank said. From the goals of RBNZ, we can single out the following: that it will maintain stimulating monetary settings until it is convinced that the goals of inflation and employment have been achieved.
The aggregate level of employment has also proved resilient, while fiscal spending continues to support domestic economic activity. That tourist business activities continue to be affected by the absence of international visitors, as the country still has rigorous coronavirus protection measures. Medium-term inflation will remain below targets until a new stimulus is introduced.
The impact of the government’s new housing policies on house price growth and economic activity will also need time to be further observed, and the medium-term growth outlook remains similar to the scenario presented in February. The MOC noted that it now has more confidence in the prospects given the rapid introduction of the vaccine abroad. The Bank continued to reduce bond purchases, arguing that this largely reflected lower government bond issues. She also noted that the reduction in bond issues meant a smaller volume of purchases within the limits of compensation provided by the Ministry of Finance. RBNZ has imposed itself that the number of bonds that the Bank does not own should not fall below 20% of GDP. We estimate that it is currently around 17% of GDP. As such, the slowdown in bond buying may continue. RBNZ is now tougher, as it believes it may need to raise rates to around 1.5% by the end of 2023 instead of 1.0%. RBNZ has become one of the first central banks in advanced economies to increase rates. We think the New Zealand dollar will continue to strengthen.
Get the latest economy news, trading news, and Forex news on Finance Brokerage. Check out our comprehensive trading education and list of best Forex brokers list here. If you are interested in following the latest news on the topic, please follow Finance Brokerage on Google News.