New Zealand: Central Bank maintains interest rates unchanged
December 6, 2012
At its 6 December monetary policy meeting, the Central Bank maintained the official cash rate (OCR) unchanged at a record-low of 2.50%, in a decision expected by the market. Monetary authorities have kept the main monetary policy rate unaltered since March 2011. In its statement, monetary officials argued that economic growth has slowed in recent months and has been accompanied by low inflation and increasing unemployment.
Authorities underlined that global economic activity remains weak, but added that uncertainty has declined somewhat in recent months. Monetary authorities emphasised that economic growth will gather pace next year, underpinned by reconstruction efforts in Canterbury and strong growth in domestic demand.
That said, the Bank recognised that possible adverse factors to growth include the government's commitment to fiscal consolidation and a strong New Zealand dollar, which could temper exports and simultaneously encourage demand for imports. Finally, the Bank stated that "on balance, it remains appropriate for the OCR to be held at 2.5 percent". The next monetary policy meeting is scheduled for 31 January.
Author: Ricardo Aceves, Senior Economist