NZIER’s Shadow Board recommends the RBNZ holds again this Thursday

07 June 2016

NZIER’s Monetary Policy Shadow Board recommends the Reserve Bank continue to hold the interest rate at 2.25 percent in its Official Cash Rate announcement this Thursday.

“The New Zealand economy is showing decent momentum, and there has been renewed interest in housing in the wake of the OCR cut in March. The acceleration in house prices is in stark contrast to the continued subdued inflation outlook. This tension is causing more headaches for the Reserve Bank.” said Christina Leung, Senior Economist at NZIER.

“Although the Shadow Board recommends the Reserve Bank holds the OCR at 2.25 percent on Thursday, it sees increased downside risk to the interest rate outlook. The pick-up in house price inflation is concerning, particularly from a financial stability perspective, but as long as the Reserve Bank’s primary goal is on lifting inflation back to its 2 percent mid-point target it will see further scope to cut interest rates.”
The Shadow Board’s average recommended interest rate fell from 2.23 percent to 2.07 percent.

Figure 1 NZIER’s Shadow Board recommends the Reserve Bank remain on hold on Thursday

Source: NZIER Monetary Policy Shadow Board

Figure 2 Individual participants’ recommended rate settings – 2 June 2016

Source: NZIER Monetary Policy Shadow Board

Table 1 Participant comments

Participant comments are always optional and can be limited to 60 words.

Scott Gardiner Pressures on commodity prices still affecting cashflow in key rural sectors balanced off by supplies issues in housing which is perpetuating the double edged sword that the RBNZ has to manage.  On balance we expect that rates will stay at current levels till past the middle of the year and gauge impacts on inflation. 
Arthur Grimes There is no need to shift rates up or down at present, so steady-as-she-goes is warranted.
Dominick Stephens No comment.
Kirk Hope No comment.
Viv Hall No comment.
Stephen Toplis We are more worried about rising house prices than weak inflation hence our bias towards higher rather than lower interest rates as our preferred, though not forecast, option.
Dave Taylor No comment.
Prasanna Gai No comment.

About the NZIER Monetary Policy Shadow Board
NZIER’s Monetary Policy Shadow Board is independent of the Reserve Bank of New Zealand. Individuals’ views are their own, not those of their respective organisations. The next Shadow Board release will be Tuesday 9 August 2016, ahead of the RBNZ’s Monetary Policy Statement. Past releases are available from the NZIER website:

Shadow Board participants share out 100 points across possible interest rates to indicate what they believe is the most appropriate Official Cash Rate setting for the economy. Combined, these scores form a Shadow Board view ahead of each monetary policy decision.

Participants show where they think interest rates should be, not what they believe will happen.

The NZIER Monetary Policy Shadow Board aims to:

  • encourage informed debate on each interest rate decision
  • help inform how a Board structure might operate
  • explore how Board members could use probabilities to express uncertainty.

For further information please contact:

Christina Leung, Senior Economist & Head of Membership Services
christina.leung, 021 992 985