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RBNZ holds monetary policy amid economic optimism


The Reserve Bank of New Zealand kept its monetary policy unchanged, holding interest rates steady at 1.75%, despite expectations of higher prices which helped the New Zealand dollar to record a three-and-a-half-month high.

The central bank saw the need to keep interest rates at their low level in order to support growth and employment, especially after the slowdown in the economy during the past year.

The current state of monetary policy, which includes holding interest rates at low level, should bolstering investment.

The RBNZ believes the current employment rates are at their highest levels as more opportunities remain in the employment sector, which will contribute to household spending and thus higher price levels that would shore inflation to the central bank's target of 2%.

The RBNZ statement was largely optimistic given the strength of New Zealand's economic activity, which is pushing up price levels, but the bank is still demanding more rise in wages.

However, the bank said it does not rule out interest rate cuts as the monetary policy will rely on economic data and considerations for creating an environment conducive to growth, highlighting that the current policy remains the most appropriate.

The New Zealand dollar jumped to a three-and-a-half-month high against the US dollar, registering 0.6815 before resuming trade at 0.6784.

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