Bollard Says Unorthodox Policies Elsewhere Impacting New Zealand

New Zealand’s economy is feeling the effects of “unorthodox” policies such as quantitative easing carried out in other developed nations, central bank Governor Alan Bollard said today.

“These are very large injections and they are clearly having an effect on capital flows and exchange rates in other countries, and we know something about that in New Zealand,” Bollard said in comments at a seminar in Wellington.

The Reserve Bank of New Zealand has kept its official cash rate at a record-low 2.5 percent since March last year as the economy recovers slowly during Europe’s debt crisis and amid weaker global demand for the country’s exports. Since the last rate reduction on March 10, 2011, the currency has risen 9 percent.

After a decade at the helm of the RBNZ, Bollard will be replaced by former World Bank official Graeme Wheeler near the end of next month. Traders are pricing in a 1 percent chance of higher rates before March and a 54 percent chance of a rate cut, according to interest-rate swaps data compiled by Bloomberg.

New Zealand’s dollar has climbed 3.2 percent this year, making it the best performer among the Group of 10 currencies after Sweden’s krona.

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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