RBNZ Flags Material Downside Risks to Economic Activity Amid Patchy Recovery
New Zealand's central bank, the Reserve Bank of New Zealand (RBNZ), is keeping a close eye on inflation and economic growth. According to BoJ Gov Ueda, policy deliberations will also take upside price risks into account. Inflation increased to 4.1 percent in the June quarter due to higher fuel prices caused by the conflict in the Middle East.
The RBNZ expects inflation to return to its target band of 2-3 percent by mid-2027, with a midpoint target of 2 percent later next year. However, some members of the committee flagged material downside risks to economic activity, warning that the recovery may continue to be patchy.
The RBNZ also noted that unused capacity still exists across the economy, with the labour market showing particular slack. Under its central scenario, additional OCR (Official Cash Rate) increases could still be required to ensure inflation returns sustainably to 2 percent target midpoint over the medium term.