11-06-2015, 10:01 PM
NZ cuts interest rate, signals more to come
BUSINESS SPECTATOR JUNE 11, 2015 4:21PM
Mitchell Neems
Business Spectator Reporter
Melbourne
The Reserve Bank of New Zealand has cut the official cash rate by 25 basis points to 3.25 per cent and is signalling more cuts could be on the way.
The move is the first reduction in the rate since January 2011.
Reserve Bank governor Graeme Wheeler said in the accompanying statement that the New Zealand economy was growing at an annual rate around three per cent, supported by low interest rates, high net migration and construction activity, and the decline in fuel prices.
But he warned that the fall in export commodity prices that began in mid-2014 is proving more pronounced, and was a key factor behind today’s decision.
“The weaker prospects for dairy prices and the recent rises in petrol prices will slow income and demand growth and increase the risk that the return of inflation to the midpoint would be delayed,” he said.
The RBNZ has an inflation target range of between one per cent and three per cent annually.
“A reduction in the official cash rate is appropriate given low inflationary pressures and the expected weakening in demand, and to ensure that medium-term inflation converges towards the middle of the target range,” he said.
“We expect further easing may be appropriate.”
On the property market, Mr Wheeler said house prices in Auckland continue to increase rapidly, and that increased supply is needed to address this.
The RBNZ said the NZ currency has declined from its recent peak in April, but remains overvalued, despite the fall in commodity prices and the expected weakening in demand.
“A further significant downward adjustment is justified,” Mr Wheeler said.
“In light of the forecast deterioration in the current account balance, such an exchange rate adjustment is needed to put New Zealand’s net external position on a more sustainable path.”
The New Zealand dollar fell as low as US70.11c, from US72.07c immediately before the decision was released at 7am (AEST). It was recently trading at US70.57c.
With AAP
BUSINESS SPECTATOR JUNE 11, 2015 4:21PM
Mitchell Neems
Business Spectator Reporter
Melbourne
The Reserve Bank of New Zealand has cut the official cash rate by 25 basis points to 3.25 per cent and is signalling more cuts could be on the way.
The move is the first reduction in the rate since January 2011.
Reserve Bank governor Graeme Wheeler said in the accompanying statement that the New Zealand economy was growing at an annual rate around three per cent, supported by low interest rates, high net migration and construction activity, and the decline in fuel prices.
But he warned that the fall in export commodity prices that began in mid-2014 is proving more pronounced, and was a key factor behind today’s decision.
“The weaker prospects for dairy prices and the recent rises in petrol prices will slow income and demand growth and increase the risk that the return of inflation to the midpoint would be delayed,” he said.
The RBNZ has an inflation target range of between one per cent and three per cent annually.
“A reduction in the official cash rate is appropriate given low inflationary pressures and the expected weakening in demand, and to ensure that medium-term inflation converges towards the middle of the target range,” he said.
“We expect further easing may be appropriate.”
On the property market, Mr Wheeler said house prices in Auckland continue to increase rapidly, and that increased supply is needed to address this.
The RBNZ said the NZ currency has declined from its recent peak in April, but remains overvalued, despite the fall in commodity prices and the expected weakening in demand.
“A further significant downward adjustment is justified,” Mr Wheeler said.
“In light of the forecast deterioration in the current account balance, such an exchange rate adjustment is needed to put New Zealand’s net external position on a more sustainable path.”
The New Zealand dollar fell as low as US70.11c, from US72.07c immediately before the decision was released at 7am (AEST). It was recently trading at US70.57c.
With AAP