New Zealand Holds Rate At Record Low; Hints Easing To Support Growth
26 June 2019 - 1:07AM
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The New Zealand central bank left its key interest rate
unchanged at a record low but hinted a rate cut over time to
underpin subdued economic growth.
The Monetary Policy Committee of Reserve Bank of New Zealand, on
Wednesday, maintained the official cash rate at 1.50 percent. The
decision came in line with expectations. The bank had last lowered
the rate in May, by a quarter point.
"Given the downside risks around the employment and inflation
outlook, a lower OCR may be needed," the bank said in a
statement.
The bank expects low interest rate together with increased
government spending to lift economic growth and employment.
Inflation is forecast to climb to the 2 percent mid-point of the
target range.
The bank noted that global economic outlook has weakened, and
downside risks related to trade activity have intensified. The
weaker global growth will affect domestic economy through trade,
financial and confidence channels, the bank said.
Policymakers observed two largely offsetting developments
affecting the outlook for domestic growth: softer house price
inflation and additional fiscal stimulus. Recent softer house
prices, if sustained, are likely to dampen household spending, the
bank said.
The committee discussed the merits of lowering the OCR at this
meeting, but concluded that a lower rate may be needed over
time.
Overall the dovish tone of today's statement suggests the Bank
will cut rates to 1.25 percent at its next meeting in August, Ben
Udy, an economist at Capital Economics, said. What's more, there is
a growing risk that this may not be the last cut this year, the
economist added.