RBNZ drops bias on higher rates; kiwi falls 30 Oct 2014
Related articles
- NZ consumers grow more upbeat, may resume spending Business
- Knowles quits as CEO of KiwiBank Business
- NZ migration bolstered by British invasion Migration
- NZ manufacturing activity reaches highest since 04 Business
- NZ dollar hits 22-month high vs euro Business
- OceanaGold finds new gold deposits at Fraser mine Business
- Transpower gets go-ahead for $170m SI upgrade Business
- NZ home sales creep up in March, still subdued Property
- NZ economy expands at fastest pace in two years Business
- New Zealand food prices fall in February Business
RBNZ keeps OCR at 3.5%, drops bias on higher rates; kiwi falls
By Paul McBeth
Oct. 30 (BusinessDesk) - Reserve Bank governor Graeme Wheeler kept the official cash rate at 3.5 percent, and toned down the prospect of higher interest rates as inflation remains unexpectedly low. The New Zealand dollar fell.
"CPI (consumers price index) inflation is currently at a low level despite above-trend growth. However, inflation is expected to increase as the expansion continues," Wheeler said in a statement. "A period of assessment remains appropriate before considering further policy adjustment."
Today's statement removed the bank's previous view that "further tightening will be necessary to keep inflation near the 2 percent target", reinforcing analysts' forecasts for a later resumption of tighter policy which included four rate hikes earlier this year. The bank had already signalled a slower pace of rate hikes in its September forecast for the 90-day bank bill rate, trimming 50 basis points from the projected horizon.
"We expect the OCR to remain unchanged at 3.5 percent, the pause duration to extend, and the resumption of the tightening cycle to become conditional," Westpac Banking Corp senior market strategist Imre Speizer said in a note before the release. "The resumption of the tightening cycle is now likely to be not until September 2015, rather than Q2 2015."
The New Zealand dollar dropped following the Reserve Bank statement. The local currency fell as low as 77.70 US cents from 78.13 cents immediately before the 9am statement. It was recently trading at 77.87 US cents.
Government data last week showed inflation slowed to an annual pace of 1 percent in the September quarter, slower than anticipated and only just within the Reserve Bank's target band of between 1-and-3 percent. The figures showed cheaper household contents and communication services and equipment offset more expensive housing, and a strong New Zealand dollar continued to limit tradable inflation.
Wheeler said the pace of inflation remains modest, with "subdued wage inflation, well-anchored inflation expectations, weak global inflation, falls in oil prices and the high New Zealand dollar" contributing to low price increases.
"House price inflation has fallen significantly since late 2013, in part due to interest rate increases and the LVR (loan-to-value ratio) restrictions," he said.
Wheeler imposed the limits on low equity home lending last year as a means to try and cool buoyant housing markets in Auckland and Christchurch without having to resort to interest rate hikes for fear of stoking demand for an already high New Zealand dollar.
He reiterated that the local currency is "unjustified and unsustainable" at its current level, and is holding back growth in the tradable sector, while acknowledging falling commodity price and global market volatility had taken some pressure of the kiwi.
"We expect a further significant depreciation," he said.
The local currency has dropped from a peak July as global demand for the greenback grows on the prospect of the US Federal Reserve moving away from its extraordinary policy of the past five years, and the Reserve Bank has been active in foreign exchange markets to try and encourage its decline. The kiwi fell today after the Federal Open Market Committee was more about the prospects for the labour market. The Fed wound up its quantitative easing programme, and said it will probably keep the federal funds rate near zero for a considerable time, to assess the strength of the US economic recovery.
The RBNZ's Wheeler said the global economy is growing at a moderate pace, though recent data showed a softening in major economies excluding the US.
New Zealand's economy was growing above trend through 2014, with strong construction activity, high inbound migration and low interest rates supporting the expansion.
"Output growth is expected to moderate over coming years, towards a more sustainable rate," he said.
The ANZ Business Outlook survey yesterday showed firms were more confident in October, snapping seven months of decline, after the uncertainty of the Sept. 20 general election passed with the re-election of the incumbent National-led administration.
(BusinessDesk)
News
Hilary Timmins' Award-Winning UK Documentary Series To Inspire NZ Students
29 Jun 2020 Education
Dream Catchers, produced and directed by Hilary Timmins, celebrates the success stories of more than thirty inspirational New... more
New Zealand reaffirms support for Flight MH17 judicial process
7 Mar 2020 News
Ahead of the start of the criminal trial in the Netherlands on 9 March, Foreign Minister Winston Peters has reaffirmed the need to... more
Business
NZ Government's Economic package to fight COVID-19
17 Mar 2020 Business News
The Coalition Government has launched the most significant peace-time economic plan in modern New Zealand history to cushion the... more
NZ Government announces aviation relief package
19 Mar 2020 Business News
Transport Minister Phil Twyford today outlined the first tranche of the $600 million aviation sector relief package announced earlier... more
Living
Diversity was Key at New Zealand Trade Tasting in London
6 Jun 2022 Food & Wine
New Zealand Winegrowers Annual Trade Tasting was recently held in London, on Wednesday 4 May, in Lindley Hall.
It was the first... more
Kiwi author stuns Behind the Butterfly Gate
12 Jan 2022 Arts
Hidden behind the Butterfly Gate is where the secret has been kept for 76 years...
New Zealand writer Merryn Corcoran’s... more
Property
Fairer rules for tenants and landlords
17 Nov 2019 Property
17 NOVEMBER 2019
The Government has delivered on its promise to the over one million New Zealanders who now rent to make it fairer... more
New Zealand Government will not implement a Capital Gains Tax
17 Apr 2019 Property
The Coalition Government will not proceed with the Tax Working Group’s recommendation for a capital gains tax, Jacinda Ardern... more
Migration
Boosting border security with electronic travel authority – now over 500,000 issued
19 Nov 2019 Migration
19 NOVEMBER 2019
We’ve improved border security with the NZeTA, New Zealand Electronic Travel Authority, which helps us to... more
Christchurch reinstated as refugee settlement location
18 Aug 2018 Migration
18 AUGUST 2018
HON IAIN LEES-GALLOWAY
The announcement that Christchurch can once again be a settlement location for refugees... more
Travel
Gallipoli Anzac Day services cancelled
19 Mar 2020 Travel & Tourism
The New Zealand and Australian Governments have announced this year’s joint Anzac Day services at Gallipoli will be cancelled... more
New Zealanders advised not to travel overseas
19 Mar 2020 Travel & Tourism
New Zealanders advised not to travel overseas
more
Sport
The Skipper's Diary: Sir Richard Hadlee honouring his father and NZ's Forty-Niners
27 Oct 2019 Cricket
NZNewsUK London Editor Charlotte Everett spoke to Sir Richard Hadlee about why he’s chosen to publish his father’s... more
PREVIEW: All Blacks v England semi-final
26 Oct 2019 Rugby
The two most convincing quarterfinals winners are set to square off in a semifinal showdown for the ages when the All Blacks meet old... more
Columns
Gordon Campbell on the Gareth Morgan crusade
11 Nov 2016 Opinion
Gordon Campbell on the Gareth Morgan crusade
First published on Werewolf
The ghastly likes of Marine Le Pen in France and Geert ... more
Gordon Campbell on the US election outcome
10 Nov 2016 Opinion
Column - Gordon Campbell
Gordon Campbell on the US election outcome
Well um.. on the bright side, there (probably)... more
Kiwi Success
Congratulations to Loder Cup winner
26 Sep 2018 People
25 SEPTEMBER 2018
The Loder Cup, one of New Zealand’s oldest conservation awards, has been awarded to Robert McGowan for 2018... more
Appointments to New Zealand National Commission for UNESCO
16 Aug 2018 Appointments
16 AUGUST 2018Appointments to New Zealand National Commission for UNESCO
HON JENNY SALESA
Associate Education Minister Jenny Salesa is... more
Recruitment
Historic pay equity settlement for education support workers
14 Aug 2018 Recruitment
14 AUGUST 2018Historic pay equity settlement for education support workers
RT HON JACINDA ARDERN
HON CHRIS HIPKINS
Prime Minister
The... more
Historic pay equity settlement for education support workers
22 Aug 2018 Recruitment
14 AUGUST 2018Historic pay equity settlement for education support workers
RT HON JACINDA ARDERN
HON CHRIS HIPKINS
Prime Minister
The... more