RBNZ sees stronger growth during next 2 years
2012-12-06 12:36:30
The Reserve Bank of New Zealand on Thursday decided to retain its benchmark Official Cash Rate (OCR) unchanged at 2.5 percent, as expected. At the same time, the central bank noted that economic growth may accelerate over the next two years.
The central bank has been holding the rate at the current record low level since April last year.
"Economic growth has slowed in recent months and has been accompanied by low inflation and rising unemployment," RBNZ Governor Graeme Wheeler said in a statement after the monetary policy meeting. "Over the next two years, growth is expected to accelerate to between 2.5 and 3 percent per annum."
He said the overall outlook is for stronger domestic demand and the elimination of current excess capacity by the end of next year. This is expected to cause inflation to rise gradually towards the 2 percent target midpoint.
Also, the global outlook remains soft but appears less threatening than was the case earlier in the year, according to the policymaker.
In the Monetary Policy Statement today, the central bank forecasts the interest yield on 90-day bank bills to be 2.7 percent in the fourth quarter of 2013, instead of 2.8 percent predicted in the September statement.
This is marginally higher than an estimated 2.6 percent in the current quarter. The rate is then forecast to rise to 2.8 percent in the first months of 2014, a tad lower than 2.9 percent projected earlier. The forecasts for 90-day bank bill rate are seen as a guide to the future direction of the cash rate. The bank remained wary of the housing market recovery, despite recent strengthening, particularly in Auckland. Wheeler observed that lower funding costs for New Zealand banks, along with increased competition for lending, have lowered mortgage interest rates.
Nonetheless, government's fiscal consolidation and continued cautiousness by households and businesses in their spending decisions remained dampening factors, Wheeler said.
"The high New Zealand dollar continues to be a significant headwind, restricting export earnings and encouraging demand for imports," he added.