"The level of interest rates are constraining spending and inflation pressure as anticipated and required," said a statement of the Reserve Bank's Monetary Policy Committee.
The committee agreed that the OCR will need to remain at a restrictive level for the foreseeable future, to ensure that consumer price inflation returns to the 1 percent to 3 percent annual target range, while supporting maximum sustainable employment.
In New Zealand, inflation, at an annual rate of 6.7 percent at present, is expected to continue to decline from its peak, it said, adding that both the labor and housing market have returned to more sustainable levels.
More generally, businesses are reporting slower demand for their goods and services, and weak investment intentions. However, the return of net inward migration continues broadly as anticipated and is assisting to ease labor shortages, and the ongoing recovery in tourism spending is supporting demand, it said.
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