Reserve Bank of New Zealand Doesn’t Anticipate a Rate Change This Year or Next

February 13, 2019

The U.S. dollar lost 1.3% overnight against the kiwi. Officials at the Reserve Bank of New Zealand chose to retain a 1.75% Official Cash Rate. This was the 15th straight monetary policy review in which the interest rate benchmark was not moved, and a released statement reiterated that the next rate move could conceivably be either up or down in direction. However, officials disappointed investors by extending the baseline forecast of no likely rate change to 2020 as well as 2019. Softer global growth may be dampening demand for New Zealand exports, but officials are not feeling any pressure to cut the rate in response.

Employment is near its maximum sustainable level. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.

Trading-partner growth is expected to further moderate in 2019 and global commodity prices have already softened, reducing the tailwind that New Zealand economic activity has benefited from. The risk of a sharper downturn in trading-partner growth has also heightened over recent months.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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