New Zealand Lowers Key Rate to 3%
Reserve Bank of New Zealand lowered its benchmark cash rate by 25bps to 3 percent in July as widely expected. It is the second consecutive cut as the growth outlook has softened while inflation remains below target. Yet, policymakers signalled further rate cuts seem likely.
Statement by Reserve Bank Governor Graeme Wheeler:
7/23/2015 12:15:28 AM
New Zealand Cuts Cash Rate to 3.25%
The Reserve Bank of New Zealand reduced the Official Cash Rate (OCR) by 25 basis points to 3.25 percent on June 11th. It is the first cut in more than four years to support income and demand weakened by lower dairy prices and recent rise in petrol cost.
Published on 2015-06-10
New Zealand Leaves Rates on Hold
The Reserve Bank of New Zealand left the cash rate on hold at 3.5 percent in April, saying it is watching closely the impact on tradables inflation from global forces and the high New Zealand dollar.
Published on 2015-04-29
New Zealand Leaves Monetary Policy Unchanged
The Reserve Bank of New Zealand left the official cash rate unchanged at 3.5 percent on March 11th as widely expected.
Published on 2015-03-11
RBNZ Keeps Interest Rate Unchanged at 3.5%
The Reserve Bank of New Zealand left the official cash rate unchanged at 3.5 percent on January 28th.
Published on 2015-01-28
Global economic growth remains moderate, with only a gradual pickup in activity forecast. Recent developments in China and Europe led to heightened uncertainty and increased financial market volatility. Particular uncertainty remains around the impact of the expected tightening in US monetary policy.
New Zealand’s economy is currently growing at an annual rate of around 2.5 percent, supported by low interest rates, construction activity, and high net immigration. However, the growth outlook is now softer than at the time of the June Statement. Rebuild activity in Canterbury appears to have peaked, and the world price for New Zealand’s dairy exports has fallen sharply.
Headline inflation is currently below the Bank’s 1 to 3 percent target range, due largely to previous strength in the New Zealand dollar and a large decline in world oil prices. Annual CPI inflation is expected to be close to the midpoint of the range in early 2016, due to recent exchange rate depreciation and as the decline in oil prices drops out of the annual figure. A key uncertainty is how quickly the exchange rate pass-through will occur.
House prices in Auckland continue to increase rapidly, but, outside Auckland, house price inflation generally remains low. Increased building activity is underway in the Auckland region, but it will take some time for the imbalances in the housing market to be corrected.
The New Zealand dollar has declined significantly since April and, along with lower interest rates, has led to an easing in monetary conditions. While the currency depreciation will provide support to the export and import competing sectors, further depreciation is necessary given the weakness in export commodity prices.
A reduction in the OCR is warranted by the softening in the economic outlook and low inflation. At this point, some further easing seems likely.