Monetary policy statement signals ‘steady as she goes’
The Reserve Bank of New Zealand’s Monetary Policy Statement (MPS) is always closely reviewed by Milestone financial advisers. The MPS is a quarterly assessment by our Reserve Bank of what they believe is happening in NZ, internationally, and the impact upon our financial stability.
The February 2017 MPS signals a ‘steady as she goes’ approach for the remainder of this year. However, the RBNZ does highlight a number of clouds on the horizon.
The quick read
- The Official Cash Rate (OCR) remains at 1.75%
- The global outlook is improving due to a recovery in commodity prices plus a more positive business and consumer sentiment;
- Global inflation and interest rates has increased and monetary policy is likely to be less stimulatory;
- In NZ, long term interest rates are rising as is our dollar exchange rate. The RBNZ believes our dollar is higher than is sustainable for balanced growth and would like to see our dollar weaken;
- Economic growth in NZ has increased as expected and the outlook remains positive. This is supported by ongoing accommodative monetary policy, strong population growth, increased household spending and rising construction activity.
- The RBNZ welcomes the slowing of house price appreciation but is not sure if the slowing will be sustained as we still have a shortage of houses in the areas where people most want to live.
- Inflation has increased but is expected to remain for the longer term at around 2%.
For a more detailed insight as to what all this might mean for you and your longer term savings, feel free to contact the team at Milestone Direct.