NZ: To avoid jeopardizing our delicate economic rebound, the Reserve Bank has made a somewhat strategic bet that inflation will remain under control
Assessing the Reserve Bank's Recent OCR Strategy
The Reserve Bank of New Zealand (RBNZ) has taken a somewhat risky stance with its latest Official Cash Rate (OCR) announcement and the accompanying Monetary Policy Statement (MPS). The context leading up to this move is noteworthy. Looking back, the RBNZ implemented a significant 50 basis point reduction to the OCR late last year, which was soon followed by an additional 25 basis point cut on November 26. In retrospect, it appears the central bank initially believed it still needed to lower rates by about 50 points. The decision to enact a larger cut in October was prompted by unmistakable indications that the desired economic momentum was not materializing as expected.
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