RTTNews - New Zealand's Official Cash Rate is holding steady at 2.50 percent, and comments from central bank Governor Alan Bollard indicate it won't be rising any time soon.
Bollard announced the rate decision Thursday morning.
The OCR remains at the level set on April 30, when it was cut 50 basis points from its previous level of 3.00 percent.
The RBNZ governor said there are signs that international economic activity is stabilizing and world financial conditions are getting better. We expect the New Zealand economy to begin growing again toward the end of this year but the recovery is likely to be slow and fragile, he said. Many key economic indicators such as unemployment are projected to keep deteriorating well into 2010.
The decision to keep interest rates steady was in line with the forecasts of most economic analysts.
While pointing to modest improvements in economic data such as housing market activity, Bollard said the RBNZ felt the improvements were probably not sustainable, and that overall, the risks to recovery are seen as downside risks rather than upside.
Bollard said the OCR could be further reduced if economic conditions warrant. He said he the central bank expects to rate to remain at or below its current rate into late 2010.
Bollard told reporters that the bank's economic stimulus policy are helping. The low OCR and stimulatory fiscal policy are the main sources of support to the New Zealand economy at present, Bollard said. It is likely to be some time before the recovery becomes self-sustaining and monetary policy support can be withdrawn.
Since last July, the RBNZ has cut interest rates a total of 5.75 percent.
Bollard also noted the recent rise in value of the New Zealand dollar, saying its effect on economic recovery could be detrimental.
The recent rise in the New Zealand dollar creates an unhelpful tension with our projections. A stronger dollar at a time of weak global growth risks delaying or even reversing the projected increase in exports, putting the sustainability of recovery at risk, he said.The kiwi was trading early Thursday at US$62.87.
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