1st August 2018
- Economic activity is moderating
- Early signs of inflation rising from low base
- But RBNZ likely on hold for a considerable time
A key theme for the New Zealand economy in 2018 has been the potential crossroads facing the economic outlook. For the past 5 years, we have seen strong economic activity and low inflation keeping interest rates low and asset prices high. However, looking forward there are signs that economic activity is moderating at the same time as inflation pressures are emerging.
Market commentary and media coverage has focused primarily on the slowing pace of economic growth, with weak business confidence, cooling construction and housing markets, and a turn down in net migration. This has reinforced the view that the Reserve Bank of NZ (RBNZ) will keep the Official Cash Rate (OCR) on hold for a considerable period, with the market pricing a small chance of a cut in the OCR by the end of 2018.