Select a page

Banking News

RBNZ cuts OCR rate to 2.5 percent

RBNZ cuts OCR rate to 2.5 percent

(10 December 2015 – New Zealand) New Zealand’s central bank has cut its official cash rate (OCR) by 0.25 percent to 2.50 percent on Thursday, bringing it to it equal lowest level on record.

The cumulative reduction this year amounts to one percent, following ongoing low inflation, weak dairy prices and a high New Zealand dollar.

In its monetary policy statement, the Reserve Bank of New Zealand (RBNZ) said: “Monetary policy needs to be accommodative to help ensure that future average inflation settles near the middle of the target range. We expect to achieve this at current interest rate settings, although the Bank will reduce rates if circumstances warrant.

“We will continue to watch closely the emerging flow of economic data.”

“The New Zealand dollar has risen since August, partly reversing the depreciation that occurred from April. The rise in the exchange rate is unhelpful and further depreciation would be appropriate in order to support sustainable growth,” said the RBNZ.

On the back of an expected weakening in the Kiwi and diminishing effects of earlier petrol price declines, the RBNZ suggested that the inflation rate will move higher in the period ahead, forecasting that it will return to the centre of its target band of 1-3% by the end of 2016.

“CPI inflation is below the 1 to 3 percent target range, mainly due to the earlier strength in the New Zealand dollar and the 65 percent fall in world oil prices since mid-2014,” noted the bank.

“The inflation rate is expected to move inside the target range from early 2016, as earlier petrol price declines will drop out of the annual calculation, and the lower New Zealand dollar will be reflected in higher tradables prices.”

Commenting on the risks to the bank’s inflation and growth outlooks, the its statement suggested that there were a “number of uncertainties”.

“In the primary sector, there are risks that dairy prices remain weak for longer, and the current El Niño results in drought conditions and weaker output. Risks to the domestic outlook include the prospect of net immigration staying high for longer and of household expenditure picking up on the back of strong house prices,” said the bank.

East & Partners's avatar

Comment on this article

 

Your comments will not be published. Required fields are marked *

 

Please enter the word you see in the image below:


Subscribe

Subscribe to our mailing list

Sign up now to keep up-to-date with the latest
market news and insights in B2B banking.

* indicates required

For more information please read our Terms and Conditions and Privacy Statements.