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Monetary Policy Statement May 2024

The Monetary Policy Committee today agreed to keep the Official Cash Rate at 5.50%.

Our monetary policy decision documents

5 things you should know

Chief Economist Paul Conway presents 5 things you should know about our May 2024 Monetary Policy Statement.

Audio: Kia ora, I’m Paul Conway – Chief Economist here at Te Pūtea Matua.

Text on screen: 5 things you should know about our May Monetary Policy Statement

Audio: Here’s 5 things you should know about our May Monetary Policy Statement.

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Audio: First, the Official Cash Rate remains unchanged at 5.5%. With interest rates at restrictive levels, excess demand in the New Zealand economy has been reduced and consumer price inflation is falling.

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Audio: Inflation is expected to return to our 1 to 3% target range by the end of 2024. Now, this welcome decline in inflation partly reflects lower prices for goods and services that are imported into New Zealand. So in many advanced economies, inflation has fallen from 30 year highs, but it is falling at a slower pace in some parts of the services sector globally.

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Audio:  In New Zealand, pressures in the labour market have eased, so businesses are employing more cautiously, given weaker economic activity. While the number of people available to work has increased due to recent high net inward migration.

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Audio: Inflation is still above the committee's 1 to 3% target band. So we will need to keep rates restrictive to ensure inflation returns to the target band within a reasonable time frame. As in other countries, inflation is persisting in parts of our economy that are less responsive to interest rates. So this is things like the cost of rents, it’s insurance costs, council rates and other domestic services.

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Audio: The sooner price and wage setters in the New Zealand economy adjust to a low inflation environment, the less unemployment will increase as inflation continues to fall. So, we are moving back to a low inflation environment and the sooner we incorporate that into our actions and decisions, the sooner interest rates can start to fall.

Thank you.

Text on screen: Reserve Bank of New Zealand Te Pūtea Matua