New Zealand interest rates were left unchanged this morning by the country’s central bank after its latest monetary policy meeting.
The Reserve Bank said its official cash rate was left steady at 3.5% because there was no need to change it, despite continuing solid growth and activity in the country’s economy.
The central bank made it clear that rates are going to be on hold for sometime to come given the four rate rises seen in the past year.
Inflation remains modest (its running at an annual 1%, half the central bank’s target rate and something to watch) and even though the high value of the Kiwi dollar is still causing some pain, it is also helping keep a lid on cost price pressures, while house price rises have eased.
RBNZ holds cash rate at 3.5 per cent
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“Lower commodity prices and increased global financial market volatility have taken some pressure off the New Zealand dollar," Governor, Graeme Wheeler said in his post meeting statement.
"However, its current level remains unjustified and unsustainable and continues to constrain growth in the tradables sector. We expect a further significant depreciation.
“CPI inflation remains modest, and was 1 percent in the year to September.
“Contributing factors are subdued wage inflation, well-anchored inflation expectations, weak global inflation, falls in oil prices, and the high New Zealand dollar.
"House price inflation has fallen significantly since late-2013, in part due to interest rate increases and the LVR restrictions.
"The economy appears to be adjusting to the policy measures undertaken by the Bank over the past year. CPI inflation is currently at a low level despite above-trend growth. However, inflation is expected to increase as the expansion continues. A period of assessment remains appropriate before considering further policy adjustment,“ he said.
“Growth in the New Zealand economy has been faster than trend over 2014, reducing unemployment and adding to demands on productive capacity.
“Strong construction sector activity, high net immigration, and interest rates, which remain low by historic standards, continue to support the expansion.
“Output growth is expected to moderate over coming years, towards a more sustainable rate,” Mr Wheeler added.
