New Zealand’s central bank cuts rates to record low 2%
New Zealand’s central bank has cut its benchmark interest rate to a record low 2 per cent, but its efforts to boost inflation and lower the currency failed to impress traders, who bid the New Zealand dollar higher.
The Reserve Bank today cut the rate by a quarter-point in a move that was widely anticipated by economists. But in its projections, the bank predicted only modest future rate cuts when many had expected deeper cuts.
“Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range,” said Reserve Bank Governor Graeme Wheeler.
The kiwi dollar jumped by more than 1 per cent after the announcement and was trading at US0.73c.
The currency moved in the opposite direction to that desired by Reserve Bank Governor Graeme Wheeler.
In a statement, Mr Wheeler said the currency needed to decline as the high exchange rate was putting pressure on exporters.
Mr Wheeler later told reporters it was always difficult to predict how currency markets would react and that the bank hadn’t given serious thought to a half-point cut.
“We didn’t think it was justified,” he said.
New Zealand has kept its interest rates higher than many developed nations as it seeks to avoid adding more fuel to a runaway housing market.
Mr Wheeler today made some of his toughest comments yet on housing, calling the rise in prices “excessive” and a risk to financial stability. The bank has introduced certain loan requirements to try and curb speculation and is considering further action.
following on from australis lowering we see new zealand at 2%..and the word is its heading to 1%..
“New Zealand has kept its interest rates higher than many developed nations as it seeks to avoid adding more fuel to a runaway housing market.”
they cant prop it up anymore..