Official cash rate unchanged for 'some time to come'

Reserve Bank governor Adrian Orr says which way the bank's next move will go is "equally balanced."

The official cash rate (OCR) will remain unchanged at 1.75% for "some time to come," Reserve Bank governor Adrian Orr says.

In a statement released this morning, Mr Orr says the direction of the bank's next move is equally balanced, up or down. "Only time and events will tell," he says.

Emerging capacity constraints are projected to see New Zealand’s consumer price inflation gradually rise to the bank's 2% annual target and lead to more business investment.

"To best ensure this outcome, we expect to keep the OCR at this expansionary level for a considerable period of time. This is the best contribution we can make, at this moment, to maximising sustainable employment and maintaining low and stable inflation," he says.

New Zealand's economic growth and employment in New Zealand remain robust, near their sustainable levels, he says.

However, consumer price inflation remains below the 2% mid-point of our target due, in part, to recent low food and import price inflation, and subdued wage pressures, Mr Orr says.

"The recent growth in demand has been delivered by an unprecedented increase in employment. The number of willing workers continues to rise, especially with more female and older workers choosing to participate. Likewise, net immigration has added to the supply of labour, and the demand for goods, services, and accommodation."

Global economic growth is forecast to continue supporting demand for New Zealand’s products and services while global inflation pressures are expected to rise but remain contained, he says.

Domestic spending and investment, by both households and government, is expected to support economic growth and employment demand.

Expectations of where inflation will be in two years’ time fell sharply in the Reserve Bank’s latest quarterly survey released yesterday but expectations of where it will be in 10 years’ time rose even more sharply.

The survey found inflation in two years’ time is expected to be 2.01%, down from 2.11%, and reversed the surprising lift in this measure in the previous survey.

But it also found inflation in 10 years’ time is expected to be 2.18%, up from 2.05% in the last survey.

More to come.


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17 Comments & Questions

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Low rates are here to stay and will be pushed out to 2021. Americas Cup coming to Auckland will boost house prices regardless of Labour policy temporary effect.
Cheap money makes it too desirable to buy property rather than low returns in the bank and loosing a fortune on the share market.

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So how do you 'loose' a fortune on the share market? The NZX Top 50 Gross Index is currently +15% over past year, and has been rising steadily since the GFC (>15%pa/5 years). With dividend yields at more than twice bank interest returns, investment in equities is a no-brainer.

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Gonna wander down to the bank and ask for some more cheap mortgage money. Babe needs more shoes and a bigger boat.

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As is the kiwi way. It looks like we have yet another bums on seats gov on our hands.
Look around Orr, rates around the world are starting to go up.... orr haven't you noticed?

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Focus seems to be avoiding much needed Royal Commission into NZ banks & insurance
Midas appears over promoted

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Given top bank job to protect banks re public finding out like in Australia
Within a month Labour into pension funds to pay for it all - Kiwisvaer about to go way of last attempt. We can do so much more with your money

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I'm actually surprised that this govt haven't announced any changes to kiwisaver. Maybe it's still to come.

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The potential for price inflation in the NZ economy is just around the corner. A few years ago oil was around US$40 a barrel and is now exceeding US$75. Coupled with the $NZ /US$ exchange rate decline and government plans to increase fuel taxes, transport costs will inevitably increase and set the stage for inflationary pressures in the NZ economy. The pressure will then be on the RB to increase interest rates in the near term.

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Higher interest now offshore / NZD to weaken under Labour + Winnie
Banks - keep it here with us in NZ
Love the country but we've shorted banks & $

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What banks won't tell you (1) They don't loan out depositors' funds (2) The money in "your account," is not your money it is the bank's. You are simply an unsecured creditor and the bank is the debtor (4) They create money out of thin air when they make a loan (5) When they make a loan they only create the principal so where does the interest come from? Think of "musical chairs," there has to be a loser. Have a look at the "Money As Debt" movies.

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Let's just continue with below-market rates that don't in any way compensate for risk, and that have destroyed the living standards of elderly savers.

Fortunately, the world is beginning to wake up to the insane and unrepayable level of debt that has been created over last decade by central bankers overseas who should have been put in straitjackets at least six years ago, and long-term rates are finally starting to move up. So I'll get better interest rates on my deposits yet, before the Big Reset from central banking and the collapse of the Western economy under command economy hubris. But thanks for nothing Adrian.

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Cheer up Mark.
Argentina is paying 20+% on deposits. Just a couple of clicks away:)

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40% But the point is to stay away from risk :)

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Wrong on most counts.
Depositors funds just don't sit there unless "on call". The money in your account is yours. The Bank is in debt to you for that amount. You are right, it is not secured. Banks do no not create "money out of thin air". When they make a loan, the loans value is covered by the borrowers equity. When they make a loan the borrower is responsible for the interest.
It would be a stupid unworkable system that would not allow an individual to"pawn" his equity (built up over time thru hard-work/good-luck) for future development and other expenses.

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Sorry everybody. My comment was actually in reply to Mr Mr Waterhouse.

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Don't you just love the way all the economists have patted him on the back for doing a great job. Economists patting their mate, an economist on the back.
Oh well at least we know what's going to happen now an economist is in the job, the opposite of what he says.

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Correct. Even if these "economists" were just as half as good as they would have us believe, should they not be all multi-millionaires?

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