Another Official Cash Rate Cut in New Zealand

September 9, 2015

The OCR was reduced by 25 basis points for a third straight time.  This reverses all but one of the similarly sized hikes between March and July of last year.  More cuts are coming according to today’s statement:  “A reduction in the OCR is warranted by the softening in the economy and the need to keep future average CPI inflation near the 2 percent target midpoint. At this stage, some further easing in the OCR seems likely. This will depend on the emerging flow of economic data.”  The statement observes a sharp decline in export prices, weaker business and consumer confidence, and lessening stimulus from construction to repair 2011 earthquake damage.  GDP is now expanding at only a 2% pace, and CPI inflation is not expected to climb back into the 1-3% target range until early 2016. The statement explicitly declares that some further depreciation of the kiwi would be appropriate, so it’s fair to assume that failure of that to happen would expedited the timing of the next OCR reduction.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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