New Zealand’s central bank lowered interest rates for the third time in three months and signaled another cut may be needed to boost inflation as growth slows.
“At this stage, some further easing in the OCR seems likely,” Reserve Bank Governor Graeme Wheeler said Thursday in Wellington after cutting the official cash rate a quarter percentage point to 2.75 percent. “This will depend on the emerging flow of economic data.”
Wheeler is responding to new RBNZ forecasts that show growth in the 12 months to March will be the weakest in three years amid a slump in dairy prices and dwindling demand, while inflation is projected to hold below his 2 percent target midpoint for a fifth straight year. Most economists forecast he will cut the benchmark to 2.5 percent in coming months, completely reversing last year’s four rate increases.
The New Zealand dollar slumped after the statement. It bought 63.24 U.S. cents at 9:07 a.m. in Wellington from 63.96 cents before the decision.
“Further depreciation is appropriate given the sharpness of the decline in New Zealand’s export commodity prices,” Wheeler said.
All 17 economists surveyed by Bloomberg forecast today’s decision, with 13 tipping at least one further decline in rates this year.