NZD - CENTRAL BANK ANALYSISObjective: The Reserve Bank of New Zealand Act 1989 identifies the RBNZ's economic objectiveas achieving and maintaining stability in the general level of prices over the medium term. In April 2019, the Act was amended to also include supporting maximum sustainable employment. In 1990, the RBNZ became the first central bank to formally adopt inflation targeting which as of 2012 is 1-3%.
As of Q4, inflation in New Zealand stands at 1.4%, unchanged from Q3. The Unemployment Rate for Q4 stands at 4.9%, compared to 5.3% for Q3.
Situation: At their February meeting, the RBNZ left its Official Cash Rate unchanged at 0.25%, and its large scale asset purchase (LSAP) programme at NZ$100 billion until June 2022. The central bank kept future rate cuts on the table, noting that the outlook is uncertain with several factors currently supporting economic activity likely to be temporary.
However, the RBNZ also upgraded its forecasts for inflation and trade weighted index for NZD and concluded that resilience in the domestic economy implies no significant additional stimulus is currently required.
