The Reserve Bank of New Zealand (RBNZ) held interest rates the same for the sixth consecutive meeting on Wednesday, stating they need to stay higher for longer to curb inflation.

The central bank’s Monetary Policy Committee held the Official Cash Rate at 5.5%, as forecast by all 25 economists in a Bloomberg poll.

“The Committee is confident that maintaining the OCR at a restrictive level for a sustained period will return consumer price inflation to within the 1-3% target range this calendar year,” the RBNZ stated

The country’s economy has entered a recession, experiencing contraction in four out of the last five quarters. This has led investors to speculate that the RBNZ will begin reducing interest rates in the latter part of this year.

However, the central bank is hesitant to shift towards monetary easing due to the fact that inflation stands at 4.7%, significantly exceeding its 2% target. Policymakers are concerned that persistently high inflation expectations could become firmly established, further complicating the situation.

“The bank doesn’t want to be seen dropping its guard before it can more confidently claim victory in the war on inflation. But we still think that it will start cutting rates by August,” said economist at Capital Economics in Singapore, Abhijit Surya.

Back in February, the RBNZ forecast inflation would revert to within the 1-3% target range by Q3 this year, and decelerate to the 2% mark by the end of 2025, Bloomberg reports.

That said, it forecast policy easing wouldn’t get underway until 2025. 

However, the majority of economists predict the first rate cut will take place in August, yet others, including ANZ Bank, forecast cuts will begin next year.

“We expect domestic inflation will fall a little more slowly than the RBNZ expects and so currently see cuts as a 2025 story,” ANZ New Zealand Chief Economist Sharon Zollner said following today’s statement.

Meanwhile, Bloomberg Economics economist James McIntyre commented, “The central bank’s capacity to remain patient in the face of weaker growth and rising spare capacity will end soon. Surging migration is showing signs of peaking, and inflows will normalise quickly. That will give way to softer economic data that are sufficiently weak to prompt the RBNZ to pivot away from the rate-hold it projects.”