The Reserve Bank has today left the official cash rate unchanged at 5.5 percent.
The RBNZ warned that inflation remained too high and monetary policy would remain restrictive.
The central bank’s forecast interest rate track suggested no rate cuts were on the horizon until mid-2025.
That puts the central bank at odds with market expectations which had started to price in cuts from May 2024.
The kiwi rose on the news that rates could be higher for longer.
The Monetary Policy Committee said it was confident that the current level of the OCR was restricting demand.
“However, ongoing excess demand and inflationary pressures are of concern, given the elevated level of core inflation.”
If inflationary pressures were to be stronger than anticipated, the OCR would likely need to increase further, it said.
The Monetary Policy Committee agreed that interest rates would “need to remain at a restrictive level for a sustained period of time, so that consumer price inflation returns to target and to support maximum sustainable employment”.
Inflation came in at 5.6 percent for the 12 months to September and was up 1.8 percent for the quarter, according to Stats NZ.
The Reserve Bank’s new forecasts see inflation falling back into the one to three per cent target band by September 2024, but not reaching the mid-point (two per cent) until September 2025.
