New Zealand Keeps Interest Rate at Record Low


New Zealand’s central bank says it will keep its benchmark interest rate at 2.5% until the middle of this year because inflation is likely to remain within its target range until at least 2012.

Reserve Bank Governor Alan Bollard said: The outlook for the New Zealand economy remains consistent with the projections underlying the December Monetary Policy Statement.

Global activity continues to recover, helping push New Zealand’s export commodity prices higher. Economic growth is most apparent in China, Australia, and emerging Asia. However, sustained growth throughout our trading partners is not assured, with many still facing impaired financial sectors and overall activity still reliant on policy support.

Similarly, the New Zealand economy continues to recover. Policy stimulus and improving export earnings have seen a pickup in household spending. That said, households remain cautious, with credit growth subdued. Business spending remains weak.

Annual CPI inflation is currently at the centre of the target band, and is expected to track comfortably within the band over the medium term.

The economy is being assisted by both monetary and fiscal policy support. As growth becomes self sustaining, fiscal consolidation would help reduce the work that monetary policy might otherwise need to do.

If the economy continues to recover in line with our December projections, we would expect to begin removing policy stimulus around the middle of 2010.”


TradingEconomics.com, RBNZ
1/27/2010 5:24:48 PM