Reserve Bank of New Zealand governor Anna Breman warned that persistently higher global oil prices could lift near-term inflation above the central bank’s September forecast. She said longer-term interest rates and the oil increase reflected a challenging global environment. The comments were issued during a regional visit to Dunedin ahead of the bank’s next monetary-policy decision on 28 October.
The RBNZ raised the official cash rate by 25 basis points to 2.75% at its September meeting. It projected a more gradual path for further tightening than financial markets had expected. The bank forecast that annual consumer-price inflation would ease to 3.9% in the September quarter from 4.1% previously.
RECOVERY REMAINS UNEVEN
Breman said New Zealand’s economic recovery should strengthen and broaden, supported by resilient exports and a gradual increase in household spending. The latest quarterly data showed gross domestic product grew by 0.2% in the three months to June.
Breman said the recovery was advancing but not uniformly, with the South Island faring better than most, supported by resilient export activity, lower unemployment and a stronger housing market.
OCTOBER DECISION DEPENDS ON DATA
The governor said the bank would assess incoming data and global developments before its October decision while maintaining a medium-term focus on inflation. Reuters reported that market pricing implied a 75% probability of another increase, which would take the official cash rate to 3%.
September-quarter consumer-price data, due on 21 October, will be published a week before the decision.
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