Investing.com-- The Reserve Bank of New Zealand kept interest rates unchanged as expected on Wednesday, but signaled significant progress towards bringing inflation back within its target range.
The RBNZ kept its official cash rate at 5.50%, marking the eighth consecutive meeting of keeping rates steady.
The central bank said that any changes in rates will be largely contingent on economic data showing a further easing in inflation. The RBNZ also signaled that it will keep monetary policy restrictive until inflation is back within its target range.
“The (Monetary Policy) Committee agreed that monetary policy will need to remain restrictive. The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures,” the RBNZ said in a statement.
The RBNZ said it now expects inflation to fall back within its target range in the second half of 2024.
Traders were seen taking dovish cues from the RBNZ’s statement. The New Zealand dollar weakened after the rate decision, with the NZDUSD pair sinking 0.4%.
Consumer price index inflation data for the second quarter is due next week.
While CPI data for the first quarter had shown some easing in inflation, especially from highs seen in 2022, the reading still remained well above the RBNZ’s 1% to 3% annual target.