NZD/USD Unchanged as RBNZ Says Policy Will Remain Accommodative
- RBNZ holds rates at 1.75% as expected, says policy will be accommodative for consider period
- The central bank favored the 4% depreciation in the NZD since February, however more is needed
- December quarter GDP data was weaker than expected, but attributed to temporary factors
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The New Zealand Dollar initially strengthened against the US Dollar before returning to its pre-event price level, following the RBNZ rate decision. The central bank held interest rates at 1.75 percent, as expected, and further signaled that monetary policy will remain accommodative “for a considerable period”. The bank cited uncertainty in its international outlook.
The bank expects headline inflation to be variable over the coming year due to food and import price dynamics. However, the RBNZ does see inflation returning to its target band in the medium-term.
The Bank noted a weaker than expected GDP report for the December quarter. Although, they attribute this to temporary factors. The growth outlook remains positive, further supported by accommodative monetary policy.
The RBNZ also cited the 4 percent depreciation since February as favorable, but noted that further depreciation is needed “achieve more balanced growth”.
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