RBNZ Press Conference: Three Committee Members Voted to Hold, Three Voted to Lift Official Cash Rate by 25 Basis Points

RBNZ Holds Cash Rate Steady at 2.25%, Inflation Expected to Peak in September Quarter

The Reserve Bank of New Zealand's (RBNZ) monetary policy committee decided to keep the official cash rate steady at 2.25%, according to a Wednesday statement.The Middle East conflict is increasing near-term inflation and weakening economic activity. RBNZ said inflation is expected to peak at 4.3% in the September quarter and to return to the 2% target mid-point in mid-2027. Annual consumers price inflation was 3.1% in the March quarter.Core inflation, wage growth, and medium- to long-term inflation expectations remain consistent with inflation returning to the 2% target mid-point over the medium term. The outlook for medium-term inflation pressures is uncertain, and they could remain elevated if households and businesses expect higher costs in future. However, weak demand and elevated unemployment will dampen medium-term inflation pressures.Business contacts and surveys in New Zealand indicate weaker confidence and spending. Consumer confidence has fallen sharply, and the housing market remains weak.The central bank said the policy rate will most likely need to increase sooner, and the pace of the increases will depend on the relative influence of persistent wage- and price-setting behavior versus weaker economic activity on medium-term inflation pressures.

Australia Inflation Slows Down in April

Australia's consumer price index (CPI) rose 4.2% in the 12 months to April, down from a 4.6% increase in the year to March, the Australian Bureau of Statistics reported Wednesday.The largest contributors to annual inflation were housing, up 6.3%, followed by transport, which increased 6.6%, and food and non-alcoholic beverages, which jumped 2.8%.The impact of higher oil prices was "seen in products and services with high freight and logistics costs, such as parcel delivery and building materials," said Sue-Ellen Luke, the bureau's head of prices statistics.Trimmed mean inflation came in at 3.4% in the 12 months to April, up from 3.3% in the year to March.Annual goods inflation declined to 4.7% in the year to April from 5.5% in March, while services inflation fell to 3.5% from 3.6%, per the report.Of the 11 groups in the CPI, seven experienced a slowdown in annual growth in April compared with March, with transport prices moderating the most.Annual housing inflation was 6.3% in the 12 months to April, reflecting rising costs for electricity, new dwellings, and rents.Electricity costs were 22.5% higher than 12 months ago, primarily related to the end of the Australian government and state-level rebates.On a month-on-month basis, the consumer price index grew 0.4% in April from a 1.1% increase in March.Automotive fuel prices fell 7% in the month to April, after rising 32.8% in March. They are still 23.5% higher than in February, and before the impact of the Middle East conflict, Luke added. Automotive fuel was excluded from the trimmed mean in both March and April.

Reserve Bank of New Zealand Maintains Official Cash Rate at 2.25%