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October, 2018 4:09 PM



NZealand rates on hold into 2020 - central bank

NZealand rates on hold into 2020 - central bank

New Zealand left its official cash rate at a record low of 1.75 percent Thursday, with the central bank saying it expected it to remain that way into 2020.

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09.08.2018 09:10 AM

New Zealand left its official cash rate at a record low of 1.75 percent Thursday, with the central bank saying it expected it to remain that way into 2020.

The base rate has been unchanged since November 2016, when it was cut from 2.0 percent.

"We expect to keep the OCR at this level through 2019 and into 2020, longer than we projected in our May (monetary policy) statement," Reserve Bank of New Zealand governor Adrian Orr said.

"The direction of our next OCR move could be up or down."

In the May statement, the bank suggested there was a chance rates could rise in late 2019.

Orr pointed to strong global growth and a lower New Zealand dollar exchange supporting export earnings as a key reason for the decision. 

"At home, capacity and labour constraints promote business investment, supported by low interest rates," he added. 

"Government spending and investment is also set to rise, while residential construction and household spending remain solid."

Orr noted that there early signs that inflation was rising, although it remained below the bank's 2.0 percent target.

"We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation," he said.

TD Securities strategist Annette Beacher said she was surprised by the bank's dovish tone.

"The economy is in far better shape than these inflation and cash rate projections suggest, but the RBNZ appears determined to sit on its hands for quite some time," she said.
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