RBNZ keeps the OCR at 2.25%, as expected, while it stated in the near term inflation, is expected to increase and economic recovery to weaken, while committee is focused on ensuring that inflation returns at a 2% target midpoint over the medium-term

Says:

• This requires core inflation and wage growth to remain contained and medium- and long-term inflation expectations to remain around 2%.
• If these conditions are not met, decisive and timely increases in the OCR would be required.
• Committee is vigilant to any generalised inflationary pressure and stands ready to act to return inflation to the target.
• Committee’s decision to hold the OCR balances the potential benefits of responding pre-emptively to the risk of higher medium-term inflation against the cost of unnecessarily stifling the economic recovery.
• Events in the Middle East have materially altered the outlook and the balance of risk for inflation.

RBNZ Minutes:

• The Committee will continue to assess the countervailing forces on the inflation outlook and stands ready to act decisively to ensure that inflation reaches the 2 percent mid-point of the target band in the medium term.
• Some members placed more emphasis on the arguments in favour of an early monetary policy response, noting that further data and analysis would provide greater clarity about medium-term inflation pressures.
• Other members emphasised downside risks to growth and argued for more opportunity to judge the extent to which weaker growth balances the second-round effects of higher fuel prices.
• However, any signs of significant second-round inflationary effects or increases in medium-term inflation expectations would require decisive and timely increases in the OCR to re-anchor inflation expectations.
• If the increase in near-term inflation is largely temporary, the Committee envisages gradually moving the OCR to more neutral levels as activity recovers and near-term inflationary pressures dissipate.
• Short-term inflation expectations are increasing.
• Economic growth is expected to be weaker in the near term.
• Supply chain disruptions will lead to higher near-term inflation in New Zealand.
• Conflict in the Middle East is leading to significant supply-side disruptions.