Reserve Bank of New Zealand "Prudently" Retains a 2.5% Official Cash Rate
December 7, 2011
For the sixth meeting in a row, monetary officials in New Zealand left the OCR at 2.5%, which matches the Great Recession low. Seven cuts between July 2008 and April 2009 slashed the Official Cash Rate by 575 basis points. Two 25-bp hikes in June and July of 2010 to 3.0% were reversed by a 50-bp cut last March right after the Canterbury earthquake on the South Island.
A statement from Governor Alan Bollard notes some “limited” ways in which the deterioration of global economic conditions are already impeding New Zealand’s economy and warns that “conditions could weaken further.” Headline inflation is believed to have fallen below the 3% target ceiling and core CPI is near the target midpoint of 2%. Wage pressures remain contained. Some recent depreciation of the kiwi is presented as beneficial, promoting exports and import-competing goods without jeopardizing the price targets.
The first policy meeting of 2012 is scheduled for January 26.
Copyright 2011, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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