New Zealand: Reserve Bank of New Zealand keeps interest rates unchanged
October 25, 2012
At its 25 October monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) maintained the official cash rate (OCR) unaltered at a record-low 2.50%, in a decision that was widely expected by the market. The move means that monetary policy officials have maintained the main monetary policy rate unchanged since March 2011. The decision was the first for newly appointed Governor Graeme Wheeler, who took over from Alan Bollard in late September. In its accompanying statement, the Bank explained that the economy continues to expand at a modest pace, as housing activity continues to grow and reconstruction in Canterbury is providing a boost to the construction sector. That said, monetary authorities emphasised that fiscal consolidation is likely to cool domestic demand, while adding that a strong New Zealand dollar continues to dampen exports. Moreover, the Bank acknowledged that global economic activity remains fragile, with further recovery depending on policy implementation. Regarding price developments, the Bank anticipates inflation to remain low going forward, with authorities expecting inflation "to head back towards the middle of the target range". Consequently, the Bank stated that "for now, it remains appropriate for the OCR to be held at 2.5 percent". The next monetary policy meeting is scheduled for 6 December.