New Zealand's Reserve Bank leaves official cash rate unchanged

Reserve Bank keeps OCR at 1.75 per cent

There is a tweak in the currency reference, where the RBNZ suggested that "a lower New Zealand dollar is needed to increase tradables inflation and help deliver more balanced growth".

RBNZ Governor Graeme Wheeler, in his last MPS before he retires, is expected to keep the official cash rate unchanged at 1.75 per cent on Thursday morning and traders will be more focused on the bank's projections for interest rates, inflation and economic growth.

Headline inflation likely to decline in coming quarters as the effects of higher fuel and food prices dissipate.

Monetary policy will remain accommodative for a considerable period.

WELLINGTON, Aug 10 (Reuters) - The Reserve Bank of New Zealand stuck firmly to its neutral stance on Thursday, saying there was no need to cut rates given a likely pick-up in inflation and appeared to be less anxious about the country's strong currency than some expected. While it said it favoured a lower New Zealand dollar, the central bank avoided stronger language, prompting a brief jump in the local currency.

"Numerous uncertainties remain and policy may need to adjust accordingly", RBNZ Gov. Graeme Wheeler said after the decision to leave the official cash rate at 1.75%. "Central banks have constraints in terms of what they can influence in terms of exchange rates and long term interest rates for example - there' s a whole range of structural factors globally affecting the economy".

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ASB chief economist Nick Tuffley said the OCR outlook was "not as "dovish" as expected".

Despite this, the central bank sees inflation growth slowing this year by more than forecast in the May statement, although it expects inflation to reach 2.0 percent in the first quarter of 2020 - broadly in line with forecasts in the May statement.

While New Zealand's economy has been expanding at a healthy clip the past several years, supported by immigration and booming tourism and construction, growth fell short of expectations in the fourth quarter of 2016 and the first quarter of 2017.

RBNZ welcomed the recent moderation in house prices, due to loan-to-value ratio restrictions, affordability constraints, and a tightening in credit conditions.

On the macroeconomic developments, RBNZ acknowledged that recent GDP growth came in weaker than expected, while housing prices moderated and inflation softened.

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