The Reserve Bank of New Zealand (RBNZ) has again kept the official cash rate (OCR) on hold at 2.25% – given the uncertainty of outcomes from Middle East tensions and oil availability, while the Kiwi economy continues to recover.

Economists widely expected the central bank to be cautious and take a longer-term view as it weighed up whether the energy shock was more of an inflation or growth concern, which supported no changes in rates for the time being.

However, markets have priced in a 25-basis-point OCR rise in September and another by year end with some economists forecasting 4% inflation by the middle of the year.

In its 8 April announcement, the RBNZ Monetary Policy Committee said in the near term, inflation was expected to increase and the economic recovery to weaken.

“In New Zealand, the extent of the near-term increase in headline inflation will depend on how the conflict in the Middle East evolves and the magnitude and duration of the disruption to global supply chains and energy markets. 

“Medium-term inflationary pressure will depend on the extent to which higher costs influence price and wage-setting behaviour by firms and workers in the economy,” the committee said.

Raine & Horne New Zealand General Manager James Shepherd said: “The OCR setting reinforces that monetary conditions are easing, yet the expected uplift in activity has been tempered by broader uncertainty, both globally and domestically.

“Factors such as geopolitical tension and rising fuel costs are clearly weighing on sentiment, and that hesitation is flowing through to both buyers and sellers.

Importantly though, there are still opportunities within this environment. Provided they have confidence in their personal circumstances, buyers are active and engaged, but decision-making remains cautious and highly price-sensitive,” James said.