The RBNZ held fire, but did not rule out further rate hikes

　　The Reserve Bank of New Zealand (NZL) kept its cash rate unchanged at 5.5 percent on Wednesday, but noted that inflation remains too high and may need to tighten policy further if price pressures do not ease.

　　The previous poll showed all 28 economists expected the RBNZ to keep its benchmark interest rate at a near 15-year high for a fourth consecutive meeting.

　　On the policy outlook, the statement said: "The committee is confident that the current level of interest rates is restraining demand, however, persistent excess demand and inflationary pressures are a concern given the high level of core inflation."

　　The New Zealand dollar rose as much as 1 percent to $0.6209 after comments from the RBNZ were seen as hawkish.

　　On the path of interest rates, the statement said: "If inflation pressures are stronger than expected, further increases in the benchmark interest rate may be required." The central bank also raised its forecast for peak interest rates to 5.7%, suggesting it may have to raise rates again. Interest rates need to remain at restrictive levels for a sustained period in order for consumer price inflation to return to target and to support full and sustainable employment."

　　The Reserve Bank of New Zealand was one of the first central banks to withdraw the monetary stimulus of the coronavirus era, raising interest rates by 525 basis points since October 2021 to curb inflation. This is the biggest tightening since the cash rate was introduced in 1999.

　　New Zealand's annual inflation rate has moderated in recent quarters and is currently at 5.6 per cent and is expected to return to the target range by the second half of 2024. The rate hike slowed the economy sharply, but recent data have shown it growing faster than the central bank expected.

　　The new centre-right government has said it will return the central bank to a single inflation-targeting function and no longer require it to take employment into account when setting interest rates.