New Zealand holds rates steady but notes easing inflation pressures

New Zealand's central bank kept interest rates steady on Wednesday for the eight straight meeting, but said it was confident inflation would return to its target range over the next six months.

As was widely expected, the Reserve Bank of New Zealand left its official cash rate at 5.5%, with the policymaking committee signalling that monetary policy would "need to remain restrictive".

"The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures," the RBNZ said in a statement.

Inflation, which eased to 4% in the first quarter of 2024 from 4.7% the preceding three months, is expected to return to within the 1-3% target range in the second half of the year, it said.

The central bank acknowledged that elevated rates have "significantly" reduced consumer price inflation, while price pressures on goods and services imported into New Zealand have also eased.

Meanwhile, labour market pressures have also lessened, which it said reflected cautious hiring decisions and an increased supply of labour.

"Some domestically generated price pressures remain strong. But there are signs inflation persistence will ease in line with the fall in capacity pressures and business pricing intentions," the RBNZ said.