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FOREX: Reserve Bank of New Zealand Leaves Key Rates Unchanged

By Research, Research Team
05 February 2014 21:46 GMT

New Zealand’s Central Bank announced its monetary policy decision on the 30th of January this year, leaving the Official Cash Rate at 2.5 percent. The official cash rate also refers to the benchmark interest rates or the overnight lending rates that banks normally follow to borrow from one another. The benchmark interest or the official cash rates have been on hold since March 2011, for a record 25 monetary policy meetings in a row.

According to a statement issued by the Central bank Governor, Graeme Wheeler, economic expansion has gained momentum and while consumer and business confidence are on the rise, inward migration has contributed to an increase in demand in the consumption and housing sectors.

The annual consumer price inflation was at 1.6 percent in 2013 and although the headline inflation numbers remain restrained, inflation is expected to slope higher during the next couple of years. The exchange rate of the New Zealand dollar remains high and has dampened inflation in the goods sector, although going forward the current exchange rate cannot be sustained. Bank Governor Wheeler further added that the bank remains committed to raising the official cash rate and the pace of such hikes would depend on the outcome of economic indicators and the headline inflation numbers.

The hawkish statement from the central bank governor had analysts and industry group experts send out alerts warning borrowers to prepare for higher interest rates in the near future, possibly at the next policy meeting in March.

Reserve_bank_of_New_Zealand_leaves_key_rates_unchanged_body_nzdhistoryandinterestrate.png, FOREX: Reserve Bank of New Zealand Leaves Key Rates Unchanged

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05 February 2014 21:46 GMT