Economists predict a "holding pattern" for RBNZ's upcoming MPR decision
The upcoming Monetary Policy Review (MPR) by the Reserve Bank (RBNZ) is anticipated to pass without significant changes by Kiwibank economists.
Differentiating between the types of policy reviews, Kiwibank’s Jarrod Kerr, chief economist, Mary Jo Vergara, senior economist, and Sabrina Delgado (pictured above from left to right), economist, aID, “The April decision is an MPR, not MPS. An MPR is a quick 'review' of policy, without the analysis. Whereas an MPS is a full-blown production.”
The distinction sets the stage for a relatively uneventful announcement, as RBNZ finds itself in a more stable position regarding inflation.
RBNZ's current stance
The central bank’s growing confidence in inflation returning to the target level means there’s no immediate pressure to adjust rates.
“We're not expecting much at all,” Kerr, Vergara, and Delgado said. “The RBNZ are in a much happier place now... So, there’s no longer any need to contemplate rate hikes. And it's still too early to contemplate rate cuts.”
Future prospects and inflation targets
Speculation about future rate cuts hinges on the annual inflation rate dropping below 3%, a milestone expected in the third quarter of the year.
“We believe the RBNZ will wait to see the annual rate of inflation break below 3% before they can contemplate rate cuts,” the Kiwibank economists said. “So, the soonest they can cut is November.”
Global context: The US economy
Contrasting with New Zealand’s position, the US faces delayed potential for rate cuts due to its economy's resilience, highlighted by a strong March jobs report.
“The US economy added 303k jobs in March, far exceeding expectations,” the economists said, underscoring the labour market’s strength. This robustness grants the Federal Reserve a “no hurry” stance, as it awaits further inflation data.
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