Reserve Bank of New Zealand Keeps Cash Rate at 2.5% (Full Text)

The following is a reformatted version of a statement released today by the Reserve Bank of New Zealand announcing that Governor Alan Bollard, after a meeting today in Wellington, held the benchmark interest rate at a record-low 2.5 percent.

“The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.

Reserve Bank Governor Alan Bollard said: “New Zealand’s economic outlook remains broadly consistent with that described in the June Monetary Policy Statement.

“New Zealand’s trading partner outlook remains weak. Several euro-area economies are in recession and Chinese growth has slowed. The risk of significant deterioration in the euro area persists.

“Domestically, the Bank continues to expect economic activity to grow modestly over the next few years. Housing market activity continues to increase as forecast, and repairs and reconstruction in Canterbury are expected to further boost the construction sector. Offsetting this, fiscal consolidation is constraining demand growth, and the high New Zealand dollar continues to undermine export earnings and encourage substitution toward imported goods and services.

“Underlying annual inflation, which recently moved below 2 percent, is expected to settle near the mid-point of the target range over the medium term.

“It remains appropriate for the OCR to be held at 2.5 percent.”

View the Monetary Policy Statement page http://www.rbnz.govt.nz/monpol/statements for the current policy assessment, Monetary Policy Statement, and data file.

To contact the reporter on this story: Brendan Murray in Sydney at brmurray@bloomberg.net

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

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