The Reserve Bank of New Zealand decided this afternoon to hold the Official Cash Rate (OCR), but it was a much closer run thing than everyone expected and the central bank has changed its forecasts to seeing three OCR hikes by the end the year. Most economists now expect three hikes in a row on July 8, September 2 and October 28, just in time for the OCR to be 3.0% by the election on November 7.

For the first time, the Reserve Bank detailed how each of the six members of the Monetary Policy Committee (MPC) voted, including that the three outside members, Prasanna Gai, Carl Hansen and Hayley Gourley, voted for a 25 basis point hike to 2.5%. The three Reserve Bank members, Governor Anna Breman, Assistant Governor Karen Silk and Chief Economist Paul Conway all voted to hold. Breman then used her casting vote as chair of the committee to ultimately hold.

Usually, the MPC has seven members, but has yet to appoint a Deputy Governor.

In the presentation above, I went through the details of the Monetary Policy Statement, the following news conference (seen below) and the key details.

I also talked about my questions and the answers in the news conference on:

* whether the Phillips Curve was still operating (21:14);

* what the Governor would say to unemployed youth about the scarring effect of four years of high unemployment (38:32);

* what the effects on inflation have been of higher inflation on regulated prices; and,

* whether the Reserve Bank’s lowering of its house price inflation forecast would generate a negative wealth effect.

Thank you Ian Dunn, Tanya Wintringham, AK, and many others for tuning into my live video! Join me for my next live video in the app.

Here’s the PDF of the presentation I used above.

Cheers

Bernard

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