The Reserve Bank of New Zealand holds steady to assess the impact of Middle Eastern shocks and soaring oil prices.

The Reserve Bank of New Zealand on Wednesday kept the official cash rate (OCR) at 2.25%, with policymakers choosing to proceed cautiously, assessing the impact of the Middle East conflict and soaring oil prices on the country’s fragile economy.

The policy statement indicated that the situation in the Middle East has materially changed the inflation outlook and risk balance; the Monetary Policy Committee is committed to ensuring that inflation returns to the mid-point of the 2% target in the medium term; the committee remains vigilant against any widespread inflationary pressures and is prepared to act promptly to bring inflation down.

In the short term, the overall rise in inflation will depend on the evolution of the Middle East conflict, as well as the extent and duration of disruptions to global supply chains and energy markets. Core inflation and wage growth need to remain controlled, and medium- to long-term inflation expectations should stay around 2%. If these conditions are not met, decisive and timely increases in the official cash rate will be necessary. (Xinhua Finance)