N.Z. Shadow Board Says Central Bank Should Extend Rate PauseTracy Withers
New Zealand’s central bank should hold the official cash rate at a record-low 2.5 percent at its Jan. 31 meeting, according to the majority of a nine-member panel of economists, academics and company executives.
Six of the so-called shadow board set up by the New Zealand Institute of Economic Research Inc. said Governor Graeme Wheeler should leave the rate unchanged this week, the Wellington-based institute said in an e-mailed statement. Two members preferred a rate cut and one is evenly split between no change and a cut.
All 16 economists surveyed by Bloomberg News predict no change in rates this week and that Wheeler’s next move will be to raise borrowing costs, probably in the second half of 2013. Traders are pricing in a more than 90 percent chance the Reserve Bank of New Zealand won’t change the benchmark borrowing cost until the second half of the year, according to interest-rate swaps data compiled by Bloomberg.
“On balance, the shadow board thinks rates should be held at low levels,” Kirdan Lees, an economist at the institute, said in the statement. “Lowering interest rates further has more support than raising rates at this point.”
The shadow board members indicate where they think interest rates should be, not what they expect will happen, the institute said. New Zealand’s official cash rate hasn’t been changed since March 2011.