While Grant Spencer will almost certainly decide to keep interest rates on hold at 1.75% at his first meeting as Governor of the Reserve Bank of New Zealand (RBNZ) on Thursday 28th September, the upcoming general election creates some uncertainty around the outlook for monetary policy further ahead. Not only will the new government be responsible for appointing a permanent Governor once Spencer’s temporary contract comes to an end in March 2018, but if the Labour party were to win it has proposed reforming the RBNZ’s mandate. We will have to wait for more clarity around these key uncertainties, but at this stage we expect interest rates to remain on hold until the second half of 2019 as inflationary pressures appear set to remain muted for some time yet.
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