(26 April 2012 – New Zealand) The Reserve Bank of New Zealand (RBNZ) has left the official cash rate at 2.5 percent.Sentiment across many economists is that the rate will remain at the low 2.5 percent until late this year, however the RBNZ has warned that it could be “reassessed” should the dollar remain high, and despite falling commodity prices.
Inflation remains low in New Zealand and well within the RBA’s 1 to 3 percent target, with figures last week revealing annual inflation of 1.6 percent.
Alan Bollard, RBNZ governor, said in a statement that inflation is restrained and is expected to stay near the middle of the Bank’s target range.
‘The domestic economy is showing signs of recovery. Housing market activity continues to increase and a recovery in building activity appears to be underway, as forecast. That recovery will strengthen as repairs and reconstruction in Canterbury pick up later in the year.”
‘However, the global outlook remains of concern. Near-term indicators have moderated and financial market sentiment is still fragile.”
‘The New Zealand dollar has stayed elevated despite recent falls in commodity prices. Should the exchange rate remain strong without anything else changing, the Bank would need to reassess the outlook for monetary policy settings.”
‘For now, it is appropriate for the OCR to remain at 2.5 percent.’