N.Z. Will Keep Record-Low Cash Rate Until Mid-2013, NZIER Says

New Zealand’s central bank will keep the official cash rate at a record-low 2.5 percent until mid-2013 because of a sluggish economy and subdued inflation, the New Zealand Institute of Economic Research said.

“The economic outlook is flat. Most indicators are moving sideways,” Shamubeel Eaqub, principal economist at the Wellington-based organization, said in a report today. “Any increases in interest rates should be contingent on convincing evidence of a sustained economic recovery.”

New Zealand’s economy will grow 1.5 percent this year, Eaqub said, reiterating a December forecast. The pace may quicken to 2.4 percent in 2013 as the reconstruction of earthquake-damaged Christchurch and the surrounding province of Canterbury accelerates.

“We are less optimistic than most on the timing of the rebuild, as we think persistent aftershocks, tougher building codes and insurance issues will slow Canterbury’s recovery,” Eaqub said.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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