Net migration figures for May showed that immigration remains high, but has moderated somewhat from its February/March peak. The migration result will further reassure the Reserve Bank that short-term inflation is unlikely to be exacerbated by a sharper spiking from new migrants’ demand.
Instead the long-term supply benefits from the 77,800 migrants we have already gained over the past year will help boost New Zealand’s long-term supply capacity.
With this data point in mind, it came as no surprise that the Reserve Bank decided to keep the official cash rate on hold at 5.50%. Given that inflation expectations are tentatively easing, and so much heavy lifting has been done by rate interest increases to date, there is no pressure to tighten the screws further at this point in time. Higher interest rates will continue to weigh on household spending for a while yet.
The Reserve Bank is now in thumb twiddling mode – it’s pretty sure that its job is done, but won’t know for sure for another 6 months or so! Popcorn out and let’s wait.
