During its July 2024 policy meeting, the Reserve Bank of New Zealand maintained its official cash rate (OCR) at 5.5%, marking the eighth consecutive rate pause and aligning with market expectations. The Committee noted that the restrictive monetary policy has been effective in reducing capacity pressures and consumer price inflation. 

Headline inflation dropped to 4% in Q1 2024, reaching a nearly three-year low, though still above the 1-3% target range. Despite this, policymakers anticipate inflation will return to the target range in the second half of the year. As a result, the Committee agreed to keep monetary policy restrictive, with plans to gradually adjust the degree of restraint as inflation pressures are expected to decline. 

The labor market has also shown signs of easing, attributed to cautious hiring practices and an increased labor supply. Overall, while progress has been made, the Reserve Bank remains committed to its restrictive stance to ensure inflation continues its downward trajectory towards the target range. 

The New Zealand dollar (Kiwi) weakened against a strengthening US dollar following Fed Chair Powell’s Senate testimony reaffirming caution on rate cuts. The Kiwi fell to approximately $0.607.  

(NZDUSD Weekly Chart) 

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