• Vince

RBNZ keeps OCR the same but remain dovish tone

At the RBNZ’s first Monetary Policy Statement of the year, the bank acknowledged the better position of the NZ economy, but sought to hold a dovish line, despite viewing the risks to the economic outlook as now being more balanced. The OCR was left on hold at 0.25%, with no adjustments to the Funding for Lending programme. The cap in purchases under the Large-Scale Asset Purchase Programme was left at $100bn by June 2022, with the bank maintaining the flexibility to adjust purchases in order to support ‘market functioning.’ We continue to expect the RBNZ will start lifting the OCR from the second half of 2022.


As expected, the RBNZ revised up its short-term economic forecasts. The bank now expects a lower peak in the unemployment rate (peaking at 5.2% vs 6.4% in November). Despite the improved outlook. The RBNZ also forecast a slightly stronger short-term lift in the CPI but does not expect long-lasting inflation pressure.


In general, the RBNZ was keen to highlight the uncertainties remaining. With wholesale interest rates moving up sharply in recent weeks, the bank was keen to keep things in perspective. In the RBNZ’s view ‘economic certainty will remain heightened’ for some time to come, which should keep business investment subdued. The bank believes the recovery is uneven, with substantial pockets of weakness in some sectors. In aggregate, the bank sought to reinforce the message that ‘prolonged monetary support’ is still necessary.