The Reserve Bank of New Zealand (RBNZ) maintained its cash rate steady at 5.5% on Wednesday. 

“The committee agreed that the OCR (official cash rate) needs to stay at restrictive levels for the foreseeable future to ensure annual consumer price inflation returns to the 1% to 3% target range,” according to the bank in its recent policy statement. 

The RBNZ said conditional on the economic outlook, the cash rate would have to stay at the current 5.5% mark for marginally longer than previously forecast in order to meet its inflation and employment goals, Reuters reports. 

The central bank still predicts the official cash rate (OCR) to remain at 5.5%, with a 40% chance of an additional rate rise to 5.75% next year, as per the monetary policy review (MPR) alongside the rate decision. 

Its track now signals it doesn’t forecast to cut rates until the first half of 2025, far later than estimated by economists, who expected cuts to start in Q2 2024. 

According to ASB Senior Economist Mark Smith, the obstacle to cash moves either way is high. 

“Still, they have signalled that they will not tolerate unwelcome stickiness in the inflation numbers,” he stated. 

Furthermore, annual inflation in New Zealand currently stands at 6.0%, just under a 30-year high of 6.7%, with expectations it will revert to the RBNZ target of between 1% and 3% by the second half of next year. 

There has been a steep slowdown following the rate hikes, with the economy now in a technical recession following two straight quarters of negative growth.

The chief economist for HSBC in Australia and New Zealand, Paul Bloxham, still forecasts the RBNZ will slash rates in Q2 2024.

“Economic activity has clearly slowed, even if it does have a bit more momentum than expected, and the economy is dis-inflating. In addition, the full impact of the monetary tightening already delivered is still to pass through to the economy,” he commented.