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RBNZ cuts OCR by a quarter percent

RBNZ cuts OCR by a quarter percent

(11 March 2016 – New Zealand) New Zealand’s central bank surprised the market with the announcement of cut in its interest rate this week.

The Reserve Bank of New Zealand (RBNZ) cut its official cash rate by a quarter of a percentage point to 2.25 percent to try and generate inflation, citing an easing growth expectations in China and Europe.

RBNZ Governor Graeme Wheeler said global central banks appear likely to keep up stimulus for longer than previously thought.

“Despite very stimulatory monetary policy settings, economic growth in New Zealand’s trading partners has been lower than expected,” Wheeler said.

“Further policy easing may be required to ensure that future average inflation settles near the middle of the target range.”

It is expected that the country’s annual inflation will be between 1-3 percent. Consumer prices rose just 0.1 percent in 2015.

Compared to global economies, New Zealand remains in good stead. The economy expanded by 0.9% in the Q3 2015, a lift of 2.3 percent over the same period a year earlier. Further, unemployment rates remain low, with consumers spending on the retail side.

However, low oil and commodity prices are keeping inflation expectations at over 20 year lows.

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