New Zealand Keeps Interest Rate Unchanged, but Warns It May Rise Later

Tauranga, May 28 (Yaoxin) —New Zealand’s central bank kept its main interest rate unchanged on Wednesday as it faced a difficult mix of weak growth and rising price pressure.

The Reserve Bank of New Zealand’s Monetary Policy Committee voted to keep the official cash rate at 2.25 percent.

The bank said annual consumer price inflation was 3.1 percent in the March quarter. It expects inflation to rise to 4.3 percent in the September quarter, before falling back to the 2 percent target mid-point by mid-2027.

The bank said core inflation, wage growth, and medium- to long-term inflation expectations still point to inflation returning to target over time.

However, the committee warned that the Middle East conflict is pushing up near-term inflation and hurting economic activity. It also said the global outlook remains uncertain because of supply chain problems, higher petrochemical prices, and a more divided trade environment.

In New Zealand, the economy is also under pressure. Business confidence and spending are weaker, consumer confidence has dropped sharply, and the housing market remains soft. Higher costs are cutting into company profits and making some firms less willing to invest or hire.

Although the rate was held steady this time, the committee said the official cash rate will most likely need to rise earlier and by more than it had expected before. The timing will depend on whether wage and price pressures stay strong, or whether weaker economic activity brings inflation down.