The central bank noted that non-tradable inflation has been more persistent than anticipated, and leading indicators suggest a continuing decline in the domestic economy’s health. Moreover, the RBNZ observed a concerning trend of a narrowing output gap, attributed to decreasing productivity and potential growth rather than an uptick in demand.
This combination of stagnant growth and persistent inflation, which can be described as a pseudo-stagflationary environment, prompted some debate among policymakers about the possibility of raising interest rates. Consequently, the forecast trajectory for the Official Cash Rate (OCR) was revised upwards during the meeting.
Despite the recent discussion of potential rate hikes, BCA Research holds a different perspective regarding the RBNZ’s monetary policy direction. BCA Research anticipates that the RBNZ has concluded its interest rate increases for the previous year. The firm forecasts that the central bank’s next move will likely be to reduce rates. This outlook is based on the expectation that the more stubborn elements contributing to inflation will subside as the year progresses.
BCA Research’s analysis suggests that the easing of these inflationary pressures should occur towards the end of the year. This projection aligns with their belief that the RBNZ will shift to a more accommodative monetary policy stance in the near future. The firm’s outlook provides an alternative view to the central bank’s current policy trajectory, suggesting a potential easing of monetary policy ahead.
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Source: Economy - investing.com
