* RBNZ official cash rate held at 0.25%, as expected
* QE, funding for lending maintained
* RBNZ says impact of new housing rules to be observed (Adds details, analyst comment)
WELLINGTON, April 14 (Reuters) – New Zealand’s central bank left all its current policy settings unchanged on Wednesday, saying monetary stimulus should continue to ensure its inflation and employment targets are met.
The Reserve Bank of New Zealand (RBNZ) also said it needed time to observe the impact of new housing market measures and a gradual revival in tourism on its recovering economy.
It kept the official cash rate (OCR) at a record low of 0.25%, while also continuing the NZ$100 billion ($70.55 billion) quantitative easing and Funding for Lending Programme (FLP) tools, both introduced last year to support a market hit by the COVID-19 pandemic.
“There was no reason for the RBNZ to deviate today from its ‘wait and see’ and ‘least regrets’ strategy, nor to set out to influence market pricing for OCR hikes, with the market on-board with the RBNZ’s message that tightening remains a distant prospect,” said Sharon Zollner, chief economist at ANZ.
The central bank had cut its cash rate by 75 basis points in March last year and pledged to keep it unchanged for 12 months, while also introducing quantitative easing to support the economy. A Reuters poll had expected the RBNZ to hold rates and keep other easing tools unchanged.
RBNZ said inflation will spike in the near term, even exceed the 2% target midpoint due to supply chain disruptions and rising oil prices, but this will be temporary.
It reiterated that the outlook still remains “highly uncertain” and that meeting its targets will necessitate considerable time and patience.
“The Committee agreed that medium-term inflation and employment would likely remain below its remit targets in the absence of prolonged monetary stimulus,” RBNZ said.
Business sentiment has been waning in recent months despite a remarkable rebound in economic activity after the COVID-19 lockdowns, and the economy contracted in the last quarter of 2020.
But these downsides were offset by the improving global outlook, and the return of Australian tourists to New Zealand next week through a COVID-19 ‘travel bubble’ arrangement.
The government, under pressure to cool a red-hot housing market, also introduced a raft of measures in March slugging investors with new taxes.
RBNZ’s committee said the housing measures are likely to dampen price growth but the extent of the effect will take time to be observed.
It acknowledged that the stimulatory monetary policy played a role in lifting house prices, along with other factors.
The government last year tasked the central bank with considering the impact its monetary and financial policy decisions have on housing prices, a move to help calm the heated market.
$1 = 1.4174 New Zealand dollars Editing by Jacqueline Wong
