Reserve Bank of New Zealand Policy Still on Hold

July 25, 2012

For the eleventh scheduled policy meeting at the RBNZ in a row, officials decided not to change the 2.5% Official Cash Rate, which is at an all-time low.  The OCR was slashed during the Great Recession from 8.25% to 2.5%, a level reached at the end of April 2009.  There were two subsequent hikes of 25 basis points in June and July of 2010, but the rate returned to the 2.5% level in March 2011 when officials acted right after the Canterbury earthquake.  Analysts had not anticipated a rate change today nor in the near future.

Officials released a statement flagging economic headwinds from the overvalued kiwi, fiscal consolidation, and possible fallout from the euro debt crisis.  Modest growth in the domestic economy is expected to be propelled by the housing market and reconstruction in the earthquake-affected region on the South Island.  Core inflation is presently below 2% and projected to hover in the medium term around the target midpoint.

The next policy statement on interest rates will be made on September 13.

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

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