As noted in its September Monetary Policy Statement, the New Zealand economy has been enjoying strong economic growth, with robust domestic demand countering weaker conditions in parts of the export sector. Strong inflation pressures are evident in some industries, although these pressures have to date been largely offset by weaker imported inflation.
In saying that, the Bank reiterates that its headroom to absorb additional inflation pressures over the medium term is limited. The current market expectations of interest rates appear broadly consistent with this view as currently reflected in financial market prices. The Bank will continue to assess activity and inflation pressures accordingly, as new information comes to hand.
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