No change to the official cash rate – the Reserve Bank this morning opted to keep it at 2.5%.
Nor is there any change in the outlook: governor Alan Bollard says the economy is continuing to recover, and inflation is in the middle of the 1-3% target
No change to the official cash rate – the Reserve Bank this morning opted to keep it at 2.5%.
Nor is there any change in the outlook: governor Alan Bollard says the economy is continuing to recover, and inflation is in the middle of the 1-3% target band, “and is expected to track comfortably within the band over the medium term.”
He does not anticipate raising the official cash rate until “around the middle” of the year – a position he has held for some time, despite the overnight index swap (OIS) markets pricing in a rate rise from April.
“Global activity continues to recover, helping push New Zealand’s export commodity prices higher,” Dr Bollard said in announcing the decision.
“Economic growth is most apparent in China, Australia, and emerging Asia.
“However, sustained growth throughout our trading partners is not assured, with many still facing impaired financial sectors and overall activity still reliant on policy support.”
Simultaneously with Dr Bollard’s decision, the US Federal Reserve came to similar conclusions – also opting to leave interest rates low, with a warning that economic uncertainties means no rate rises are likely for an extended period.
There is still uncertainty on the local front, too, about how robust the recovery is going to be, Dr Bollard said.
“Similarly, the New Zealand economy continues to recover. Policy stimulus and improving export earnings have seen a pickup in household spending.
“That said, households remain cautious, with credit growth subdued. Business spending remains weak.”
The next official cash rate review, accompanied by a full monetary policy statement with updated economic forecasts, is due March 11.
