New Zealand’s Official Cash Rate Sliced 25 Basis Points to 2.0%

August 10, 2016

Four  sentences from a statement released by the Reserve Bank of New Zealand explain why the OCR was cut today and the likely direction of the next interest rate change.

Weak global conditions and low interest rates relative to New Zealand are placing upward pressure on the New Zealand dollar exchange rate.

Headline inflation is being held below the target band by continuing negative tradables inflation.

Although long-term inflation expectations are well-anchored at 2 percent, the sustained weakness in headline inflation risks further declines in inflation expectations.

Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range.

There have been six rate cuts of equal size since June 2015.  The four moves between that first one and this sixth one occurred in July 2015, September 2015, December 2015, and March 2016.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission. 



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