Reserve Bank of New Zealand Continues 3.5% Official Cash Rate

October 29, 2014

Four 25-basis point interest rate hikes were implemented this year at meetings in March, April, June and July, but this month’s meeting like that in September kept policy on hold.  Indeed, the kiwi remains too high, CPI inflation is still only modest, and house price pressures have eased significantly.

Lower commodity prices and increased global financial market volatility have taken some pressure off the New Zealand dollar. However, its current level remains unjustified and unsustainable and continues to constrain growth in the tradables sector. We expect a further significant depreciation.

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.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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