The Reserve Bank of NZ has joined the RBA in ignoring clamour from some silly market economists and media columnists for a rate rise.
Some in the markets reckon the Australian and NZ central banks should be thinking about following the rate rises of the US Federal Reserve.
But from comments today by the bank’s acting governor, Graeme Wheeler a rate rise is the last thing the central bank has its on its mind at the moment.
The Kiwi central bank left its official cash rate unchanged at 1.75% this morning, a move widely expected by most of the market.
Adding to the policy stance, the bank pointed to signs of a softening in an important part of the NZ economy.
In his post-decision statement, Mr Spencer said the NZ economy is expected to continue to grow “at its current pace” of recent months, but added that “construction was weaker than expected”.
"GDP in the June quarter grew in line with expectations, following relative weakness in the previous two quarters. While exports recovered, construction was weaker than expected.
"Growth is projected to maintain its current pace going forward, supported by accommodative monetary policy, population growth, elevated terms of trade, and fiscal stimulus.
In its previous update the Reserve Bank had predicted that growth would accelerate.
The Reserve Bank also pointed to a weakening in house prices, although the wording was the same at the August statement and warned of the risk that price increases could resume.
"House price inflation continues to moderate due to loan-to-value ratio restrictions, affordability constraints, and a tightening in credit conditions," Spencer said.
"This moderation is expected to continue, although there remains a risk of resurgence in prices given population growth and resource constraints in the construction sector".
Spencer said monetary policy "will remain accommodative for a considerable period" and that numerous uncertainties remained.
