New Zealand’s recovery will be slower, constraining inflation and adding to the case for interest rates to stay low for longer, according to a survey by the New Zealand Institute of Economic Research Inc.
Gross domestic product will rise 2.8 percent in the year ending March 31, 2014, according to the NZIER Consensus Forecasts released today, compared with 2.9 percent forecast three months ago. Growth in the current year will be 2.3 percent from 2.4 percent previously expected, the Wellington-based institute said in an e-mailed statement.
A slower recovery adds to signs that the central bank will keep interest rates at a record-low 2.5 percent for longer. Reserve Bank of New Zealand Governor Graeme Wheeler signaled on Dec. 6 that borrowing costs may not rise until 2014 amid benign inflation and sluggish demand.
“The grinding recovery means inflation will remain subdued,” NZIER said in the report. “Forecasters expect interest rates to be lower for longer, with gradual rate increases expected from late 2013.”
Annual inflation will be 1.4 percent in the year through March, down from 1.8 percent in September’s forecasts, according to the survey of 10 economists, which includes seven banks, the Reserve Bank, the Treasury Department and the institute.
Inflation will be 2.1 percent in the 12 months to March 2014 and 2.4 percent a year later, the survey showed.
Economists forecast slower jobs growth and higher unemployment over the period to March 2015. The currency will also be higher than previously expected, the survey shows.
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