New Zealand Shadow Committee Narrowly Backs Holding OCR at 2.25% in July

Members of the New Zealand Institute of Economic Research (NZIER) Shadow Monetary Policy Committee were nearly evenly split, highlighting uncertainty ahead of the Reserve Bank of New Zealand’s July policy meeting. According to Jin10, the committee narrowly supported keeping the official cash rate (OCR) unchanged at 2.25% in July, describing the decision as essentially neck-and-neck with an alternative of raising rates by 25 basis points. Members who favored lifting the OCR toward a neutral level as soon as possible cited rising inflation as their main reason. Others said weak demand and persistently high unemployment were key factors requiring caution when weighing further tightening. The committee’s views on the impact of oil price shocks differed. Some members said the inflation effect was temporary and already fading, while others warned that price pressures could persist for a longer period. Some members said the next important point for policy assessment would come when second-quarter CPI data are released. Committee members agreed that the OCR should rise to between 3% and 3.25% over the next year. Several members said monetary policy should gradually return to a neutral stance, while also noting that weak demand and elevated unemployment mean the central bank should be careful about the pace of tightening.