By CentralBankNews.info
    New Zealand’s central bank left its benchmark Official Cash Rate (OCR) at 1.75 percent, as expected, and underscored that it intends to keep an accommodative monetary policy stance by confirming that it first expects to raise rates by September 2019.
     The Reserve Bank of New Zealand (RBNZ), which adopted a neutral policy stance in November 2016, also reiterated its guidance from March that monetary policy will “remain accommodative for a considerable period” as there are numerous uncertainties – specifically “extensive political uncertainty” – that could require an adjustment to policy.
      The only substantial change to its policy statement concerns the exchange rate of the New Zealand dollar – known as the kiwi – which has depreciated in the last eight months following a rise in the previous 12 months.
     RBNZ Governor Graeme Wheeler welcomed the recent fall in the kiwi, saying this was “encouraging and, if sustained, will help to rebalance the growth outlook towards the tradables sector.”
     This is a sharp shift in tone from February, when Wheeler said a “decline in the exchange rate is needed,” and in March when he said “further depreciation is needed to achieve more balanced growth.”
     The New Zealand dollar was trading at 1.47 to the U.S. dollar today, down 2 percent since the start of this year. On a trade-weighted basis, the kiwi is down around 5 percent since February.
      In an update to its monetary policy forecast, the central bank forecast OCR would remain at the current level until September 2019 when it then would rise to 1.9 percent and be raised to 2.0 percent by March 2020 and remain at that level until the end of the forecast horizon in June 2020.
    This forecast is unchanged from the previous forecast from February.
     But the RBNZ also acknowledged that inflation is starting to pick up, with the inflation rate seen at 2.1 percent in June and September this year before easing to 1.7 percent in December.
    The rise in inflation – it rose to 2.2 percent in the first quarter of this year from 1.3 percent in the previous quarter – was seen as temporary due to higher petrol and food prices.
     In its previous forecast, inflation was seen at 1.5 percent in March and June, then 1.7 percent in September and 1.3 percent in December this year.
     “Non-tradables and wage inflation remain moderate but are expected to increase gradually,” Wheeler said in a statement, adding this would help bring inflation to the midpoint of the central bank’s target band of 1-3 percent in the medium term.
     During 2018 inflation is seen consistently below the central bank’s 2.0 percent target before rising to that level in June 2019 and then remaining at 2.0 percent or slightly above through June 2020.
    Wheeler also said New Zealand’s economic growth in the second half of last year was weaker than expected but the outlook remains positive on continued accommodative monetary policy, strong population growth and high levels of household spending and construction activity.
     In the fourth quarter of last year New Zealand’s Gross Domestic Product eased to an annual rate of 2.7 percent from 3.3 percent in the third quarter.
     Looking at the 12 months from March, the RBNZ forecast 2.9 percent growth in 2017, down from 3.7 percent forecast in February. For 2018 the forecast was raised to 3.7 percent from 3.5 percent and the 2019 forest to 3.1 percent from 2.6 percent. For 2010 growth is seen at an unchanged 2.1 percent.