New Zealand’s Reserve Bank has followed its Australian counterpart again in not moving its key interest rate.
In a statement issued Thursday morning, RBNZ governor, Adrian Orr repeated a previous forecast that the bank expects to hold its official cash rate steady at 1.75% “through 2019 and into 2020.”
“We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation,“ he said this morning.
But unlike the RBA, which upgraded its forecasts for economic growth, inflation and unemployment in Tuesday’s statement, the RBNZ is more cautious about the outlook for the Kiwi economy.
“The pick-up in GDP growth in the June quarter was partly due to temporary factors, and business surveys continue to suggest growth will be soft in the near term. Employment is around its maximum sustainable level.
“However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.
“GDP growth is expected to pick up over 2019. Monetary stimulus and population growth underpin household spending and business investment. Government spending on infrastructure and housing also supports domestic demand. The level of the New Zealand dollar exchange rate will support export earnings.”
“Downside risks to the growth outlook remain. Weak business sentiment could weigh on growth for longer. Trade tensions remain in some major economies, raising the risk that trade barriers increase and undermine global growth.
“Upside risks to the inflation outlook also exist. Higher fuel prices are boosting near-term headline inflation. We will look through this volatility as appropriate. Our projection assumes firms have limited pass through of higher costs into generalised consumer prices, and that longer-term inflation expectations remain anchored at our target,”Mr Orr said in this morning’s statement..
