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New Zealand's Central Bank Should Hold Rate Steady at Upcoming Meeting, NZIER Shadow Board Recommends in Close Call

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The New Zealand Institute of Economic Research's (NZIER) monetary policy shadow board is split on how the Reserve Bank of New Zealand (RBNZ) should act at its upcoming meeting, although most views recommend maintaining the official cash rate at 2.25%, NZIER said in a Monday report.

It is a very close call, however, as many shadow board members believe the central bank should raise the rate by 25 basis points in July, with higher inflation cited as a key reason by members who want the rate to move back toward neutral sooner rather than later.

In terms of the rate's outlook a year from now, shadow board members are still in agreement that the RBNZ should increase borrowing costs over the coming year to a range of around 3% to 3.25%, according to the report.

Members of the shadow board feel the central bank should consider soft demand and New Zealand's elevated unemployment rate in determining the pace of tightening over the coming year.

"The case for an eventually increasing OCR remains solid, but the urgency seems reduced given the marked reduction in energy prices," said NZIER shadow board member Kelly Eckhold.

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