Reserve Bank of New Zealand

September 28, 2017

New Zealand’s official cash rate has been at a record low of 1.75% since a 25-basis point reduction in November 2016, and that’s only half as high as the 3.50% peak maintained from July 2014 until June 2015.

Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.

So proclaims a statement released today after the latest policy review. One uncertainty is last weekend’s inconclusive general election in which the ruling National Party won a plurality but not a majority of parliamentary seats. Another is that the governorship of the central bank is in a transition period, and then there are also the myriad of global geopolitical challenges faced by most nations.

New Zealand monetary officials, like their Aussie counterparts, have for some time been concerned about their exchange rate getting too pricey, and this statement toughens the language on that matter to read, “The trade-weighted exchange rate has eased slightly since the AugustĀ Statement. A lower New Zealand dollar would help to increase tradables inflation and deliver more balanced growth.” Total inflation is not expected to rise to the 2% target until sometime after the start of 2018.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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