New Zealand Central Bank Keeps Rate Unchanged

(RTTNews) - The Reserve Bank of New Zealand maintained its key interest rate on Wednesday, citing the impact of the Middle East conflict on domestic inflation and economic recovery.

The Monetary Policy Committee, governed by Anna Breman, decided to hold the key interest rate at 2.25 percent, as widely expected.

The bank has lowered its benchmark rate by 325 basis points since August 2024, bringing it to the lowest since mid-2022.

"The Committee's decision to hold the OCR balances the potential benefits of responding pre-emptively to the risk of higher medium-term inflation against the cost of unnecessarily stifling the economic recovery," the bank said in a statement.

The committee noted that the events in the Middle East materially altered the outlook and the balance of risks for inflation and economic growth.

Inflation is expected to increase in the near term and the extent of the increase will depend on how the conflict in the Middle East evolves and the magnitude and duration of the disruption to global supply chains and energy markets.

Policymakers observed that the Middle East conflict will result in weaker economic activity in the near term.

The MPC said it remained focus on ensuring that inflation returns to the 2-percent target midpoint over the medium term.

Further, the summary of the meeting showed that members discussed the timing of any increase in the interest rate. They said pre-emptive response to medium-term inflation pressures could guard against the risk of inflation expectations becoming unanchored.