RBNZ estimates New Zealand's neutral interest rate at 3.9%, while the current OCR at 5.5% aims to curb inflation.
The Reserve Bank of New Zealand (RBNZ) estimates the country's neutral interest rate (NIR) at around 3.9% to neither stimulate nor restrict the economy, while the current OCR (Official Cash Rate) at 5.5% is aimed at curbing inflation. As inflation expectations decline, a lower OCR is considered neutral, with an average of five different real NIR estimates suggesting an OCR of 2.5% as neutral in the long term. The RBNZ acknowledges the complexity and uncertainty in estimating the NIR, recommending multiple indicators and expert judgement.
April 15, 2024
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