(16 September 2010 – New Zealand) The Reserve Bank of New Zealand has decided to leave the nations official cash rate unchanged, warning the Canterbury earthquake coupled with cautious consumers has resulted in slower than expected growth.The latest decision to leave interest rates steady at 3 percent follows two consecutive rate hikes in June and July.
Reserve Bank governor Allan Bollard said, after the decision, that while global and domestic economies had continued to recover, the outlook had weakened since the RBA’s June statement.
The RBA considers it appropriate at this point to keep the OCR on hold, Mr Bollard added.
Dr Bollard highlighted that the earthquake of the early hours of September 4 had ‘significantly disrupted economic activity’ and was likely to continue to do so for some time, despite limited signs of damage to the export sector.
The central bank indicated that it had already finalised its economic forecasts on which it based its interest decision before the earthquake and while it had reviewed the decision since, it had already decided hold interest rates.
Looking more generally at the domestic economy, the household sector remains cautious, with consumer spending soft, house sales falling and house prices remaining flat,” Dr Bollard said.