New Zealand's central bank decided to hold its benchmark rate unchanged and suggested that they will remain restrictive to ensure that inflation returns to the target.
The Monetary Policy Committee of the Reserve Bank of New Zealand, led by Governor Adrian Orr, maintained the Official Cash Rate at 5.50 percent, in line with expectations.
The RBNZ MPC decided to keep the interest rate at a restrictive level to ensure that inflation returns to the 1 to 3 percent target range and to support maximum sustainable employment.
The Reserve Bank has started the current tightening cycle in October 2021, when the OCR was 0.25 percent.
Policymakers noted that interest rates are constraining economic activity and lowering inflationary pressures as needed.
The bank expects inflation to fall to the target band by the second half of next year. Regarding labor market, policymakers said employment is above its maximum sustainable level.
Policymakers observed that there is a near-term risk of activity and inflation not slowing as much as needed. Further, a greater slowdown in global economic demand, particularly in China could damp commodity prices and in turn export revenue.
Although the central bank is likely to retain its tightening bias, the official cash rate is at its cyclical peak, Capital Economics' economist Abhijit Surya said.
