New Zealand’s central bank held interest rates at a record low and said it doesn’t expect to raise them for two years amid weak inflation.
“Monetary policy will remain accommodative for a considerable period,” Reserve Bank Governor Graeme Wheeler said in a statement after keeping theofficial cash rate at 1.75 percent. The bank maintained its forecast that rates won’t rise until the third quarter of 2019, and lowered its projections for inflation.
The RBNZ’s surprisingly cautious tone in recent months has been justified by the latest data. Inflation has slowed more than economists forecast and economic growth has disappointed on the downside. The strong New Zealand dollar remains a headache for the bank, damping import prices and suppressing inflation.
The currency nevertheless rose after the statement to trade at 73.51 U.S. cents at 12:27 p.m. in Wellington.
New Zealand’s housing market is also cooling, led by a drop in Auckland prices, which may reduce pressure on inflation and keep interest rates lower for longer. Annual house-price growth slowed to 2.8 percent in June from 5 percent in May and 10 percent in March, the Real Estate Institute of New Zealand said last month.
Source: Bloomberg Pro Terminal
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