Did the Level 4 lockdown affect its decision?
The Reserve Bank of New Zealand has kept the Official Cash Rate on hold at 0.25 percent.
In its statement, the Reserve Bank said that the decision was made “in the context of the Government’s imposition of Level 4 COVID restrictions on activity across New Zealand.”
This is in line with the latest economist expectations, which previously forecast a rise in the OCR for August, provided there were no further COVID-19 outbreaks or lockdowns.
The Reserve Bank said that the Monetary Policy Committee will be assessing the inflation and employment outlook on a regular basis, and will still be looking to reduce the level of monetary stimulus over time.
“Global monetary and fiscal settings remain at accommodative levels, supporting international spending and investment,” the Reserve Bank said.
“Rising vaccination rates across many countries have provided economic impetus. The rise in activity has continued to support demand and prices for New Zealand’s export commodities.”
“However, the need to reinstate COVID-19 containment measures in some regions highlights the serious health and economic risks posed by the virus,” it explained.
“Persistent and elevated health risks are promoting ongoing global supply chain disruptions, and are acting to constrain productive capacity and prolong inflationary pressures.
“Today’s re-introduction of Level 4 restrictions to activity across New Zealand is a stark example of how unpredictable and disruptive the virus is proving to be.”
The Reserve Bank said that New Zealand’s economy still appears “robust” despite some weaknesses in the sectors most affected by lack of tourism. It noted that labour market pressures are still strong, but said that it is confident in meeting its inflation and employment targets with “less need for the existing level of monetary stimulus.”
“The Committee remains alert to the supply disruptions that COVID-19 can create, and the dampening effect this can have on confidence,” the statement said.
“The Committee agreed that their least regrets policy stance is to further reduce the level of monetary stimulus so as to anchor inflation expectations and continue to contribute to maximum sustainable employment.
“They agreed, however, to keep the OCR unchanged at this meeting given the heightened uncertainty with the country in a lockdown.”
