Reserve Bank keeps cash rate at 0.25%

The Reserve Bank has chosen to keep the official cash rate at 0.25 per cent after its latest review of monetary policy.

As expected, the settings for its quantitative easing programme, which is capped at $100 billion, and for its $25b Funding for Lending programme, have also been left unchanged.

The central bank said the global economic outlook had continued to improve since February but that economic activity in New Zealand slowed over the summer months after its earlier rebound in domestic spending.

The bank forecast the planned opening of the trans-tasman travel bubble would support incomes and employment in the tourism sector, in both New Zealand and Australia.

But in an apparent nod to concerns the bubble might not lift economic activity overall, it said ‘‘the net impact on overall domestic spending will be determined by the two-way nature of this travel’’.

The extent of the dampening effect of the Government’s new housing policies on house price growth, and consumer price inflation and employment, would also ‘‘take time to be observed’’, it said.

The Reserve Bank said that, overall, its medium-term outlook remained similar to the scenario it presented in February but it was ‘‘prepared to lower the OCR if required’’.

‘‘This outlook remains highly uncertain, determined in large part by both health-related restrictions, and business and consumer confidence.’’

The bank said ‘‘temporary factors’’, including disruptions to global supply chains and higher oil prices, were leading to higher cost pressures. But it believed inflation and employment would likely remain below target ‘‘in the absence of prolonged monetary stimulus’’.

In an apparent message to the major banks, it noted ‘‘volatility’’ in wholesale interest rates, but said any increase in bank lending rates would be ‘‘premature given the current economic outlook’’.

Kelvin Davidson, a property economist at consultancy firm Corelogic, said the statement contained no surprises and the Government’s housing tax changes had probably made the Reserve Bank’s job a little easier.

Corelogic had expected the Reserve Bank to impose restrictions on interest-only mortgages next month, for example, but believed the chances of that had now reduced.

‘‘This outlook remains highly uncertain . . .’’ Reserve Bank