New Zealand Monetary Setting Still in Pause Mode at Very Accommodative Level

April 25, 2012

The last change in New Zealand’s Official Cash Rate (OCR) happened in March 2011 when a 50-basis point cut in the wake of the Canterbury earthquake returned the OCR to its cyclical low of 2.5%.  Such had been at 2.5% also from April 2009 until June 2010.  A statement on the Reserve Bank of New Zealand web site makes similar points to those in the prior policy statement released March 8.  Inflation is projected to hover in the middle of the target range, in other words at a “restrained” level.  Domestic economic recovery is making progress, but the global situation and strength of the New Zealand dollar remains concerns.  The March statement advised that “sustained strength in the New Zealand dollar would reduce the need for future increases in the OCR.”  Today’s remarks include this:  “Should the exchange rate remain strong without anything else changing, the RBNZ would need to reassess the outlook for monetary policy settings.”

Prior to seven rate cuts totaling 575 bps between July 2008 and April 2009, the OCR crested at 8.25%.  The next OCR policy statement is scheduled for June 14.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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