(29 April 2010 – New Zealand) New Zealand’s central bank said on Thursday it would hold the official interest rate at a record low 2.5 percent but added it expected to start raising rates soon.The Reserve Bank of New Zealand’s governor Alan Bollard said that risks to the global outlook remained ‘elevated,’ perhaps re-evaluating his pre-forecast that the official cash rate would start to rise around the middle of the year.
Mr Bollard said that the government expects the New Zealand economy to recover in line with or slightly faster than its March statement projection.
The governor also said that as they previously indicated, the government expects to begin removing policy stimulus over the coming months, provided the economy continues to evolve as projected.
However, at the same time, risks to the global outlook remain elevated, Mr Bollard highlighted.
The nation, which slipped into the recession at the beginning of 2008, saw gross domestic product start to improve only in the last quarter of last year and currently households are continuing to remain cautious with their spending.
Despite the official interest rate remaining at the 2.5 percent low from April last year, the housing market and household credit growth were deflated.
Business spending was also weak and firms continued to reduce debt, while inflation was expected to remain within the bank’s target range of one to three per cent in the medium.