NZ holds rates, Australia CPI flat, Fed cautious on cuts

New Zealand holds cash rate for 5th straight meeting

The Reserve Bank of New Zealand (RBNZ) held its official cash rate (OCR) steady at 5.5% for the fifth consecutive meeting, during its first policy discussion of 2024, aligning with market expectations. The central bank noted a decrease in core inflation and inflation expectations, suggesting a more balanced inflation outlook. However, it acknowledged that headline inflation continues to exceed its 1 to 3% target range.

In a cautious approach to monetary policy, the RBNZ signaled the necessity of maintaining the OCR at a restrictive level to temper inflationary pressures, slightly adjusting its peak cash rate projection to 5.6% from a previous forecast of 5.7%. The bank anticipates initiating monetary easing by mid-2025.

Amid mixed domestic economic indicators and concerns over China's economic performance—a key trading partner—the RBNZ projects subdued growth in the near term. The global economic context, marked by the persistence of central banks' hawkish stances to combat inflation, further complicates the economic outlook.

Australian CPI holds steady, remaining above RBA's target

Australia's Consumer Price Index (CPI) for January 2024 recorded a 3.4% year-on-year increase, consistent with the previous month and below analysts' expectations of a 3.6% rise. This rate, the lowest since November 2021, reflects a deceleration in housing and transport costs. Despite this slowdown, inflation continues to operate outside the Reserve Bank of Australia's (RBA) target range of 2-3%.

Fed’s Bowman: Not time for rate cuts yet

In the United States, Federal Reserve Governor Michelle Bowman emphasized the premature nature of reducing interest rates, despite ongoing inflationary pressures. Bowman highlighted the Fed's openness to further rate increases should inflationary trends not convincingly trend towards the 2% target.