New Zealand holds benchmark rate at record low
2012-09-13 17:56:37
New Zealand's central bank held interest rates at a record low 2.5 percent, citing slowing growth in China and ongoing uncertainty in Europe.
Only modest economic growth was expected in the next few years, Reserve Bank of New Zealand governor Alan Bollard said on Thursday.
The official cash rate has been at 2.5 percent since it was March last year, when it was cut in a bid to limit the impact of the devastating earthquakes that struck Canterbury in the south.
Since then, soft global conditions, as well as the persistent strength of the New Zealand dollar, have meant the inflation outlook has remained subdued and "it remains appropriate" to keep the rate on hold, Bollard said.
"New Zealand's trading partner outlook remains weak. Several euro-area economies are in recession and Chinese growth has slowed. The risk of significant deterioration in the euro area persists."
Domestically, economic activity was forecast to grow modestly over the next few years.
"Housing market activity continues to increase as forecast, and repairs and reconstruction in Canterbury are expected to further boost the construction sector.
"Offsetting this, fiscal consolidation is constraining demand growth, and the high New Zealand dollar continues to undermine export earnings and encourage substitution toward imported goods and services," Bollard said.
New Zealand's annual inflation recently moved below 2.0 percent and is expected to settle near the mid-point of the 1.0-3.0 percent target range over the medium term.