Reserve Bank of New Zealand

January 30, 2013

The Official Cash Rate of the RBNZ, which has been at 2.5% since a 50-basis point cut in March 2011 soon after the South Island earthquake, was again left at that level and called “appropriate” in a statement from Governor Wheeler.  2.5% matches the Great Recession low following seven cuts between July 2008 and June 2009 totaling 575 basis points.  In between then and the aforementioned March 11 reduction, two hikes of 25 bps each were implemented in June and July of 2010.

Wheeler’s statement looks to strengthening growth this year but notes that inflation at the moment remains a bit below the 1-3% target range, depressed in part by an “overvalued” kiwi and some slack in the economy with a weak labor market and fiscal restraint.  Policymakers anticipate inflation drifting upward toward the target midpoint and do not seem in any hurry to either cut or hike the OCR.  Wheeler warns, “the Bank does not want to see financial stability or inflation risks accentuated by housing demand getting too far ahead of supply.”

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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