New Zealand Gets an Interest Rate Cut of 25 Basis Points

November 10, 2016

The Reserve Bank of New Zealand’s new Official Cash Rate level is 1.75%, the lowest ever, and this third such cut in 2016 was largely motivated by a need to depreciate the kiwi, which has become “higher than is sustainable forĀ  balanced economic growth” and because an overvalue currency is depressing inflation associated with tradable goods. They are still declining. Governor Wheeler’s statement mentions excessive house price inflation (and so does Gail Collins’ Op-Ed column in the NYT). Officials continue to watch numerous sources of uncertainty in the international scene, so monetary policy needs to be accommodative both because of those risks and since inflation hasn’t risen to the 3% target yet. The central bank interest rate was earlier cut by a full percentage point in 2015 from 3.5%, a level that prevailed from July 2014 until June 2015.

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

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