The Reserve Bank of New Zealand on Thursday held steady its Official Cash Rate at 2.50 percent.
That was in line with expectations after the bank had cut the rate by 25 basis points at its December meeting. There was no change in October, but the central bank had pared the OCR by 25 basis points in each of the three previous meetings after seven consecutive months with no change.
The OCR remains at a record low as the country deals with continued economic slowdown.
“The domestic economy softened during the first half of 2015 driven by the lower terms of trade. However, growth is expected to increase in 2016 as a result of continued strong net immigration, tourism, a solid pipeline of construction activity, and the lift in business and consumer confidence,” RBNZ Governor Graeme Wheeler said in a statement accompanying the decision.
The bank acknowledged that the New Zealand dollar has weakened somewhat, calling it helpful and appropriate given persistent weakness in export prices.
Low inflation also was a factor as the headline figure for consumer prices remains beneath the bank’s target range of 1 to 3 percent.
“Headline CPI inflation remains low, mainly due to falling fuel prices. However, annual core inflation, which excludes temporary price movements, is consistent with the target range at 1.6 percent. Inflation expectations remain stable,” Wheeler said.
The bank added that there are a number of uncertainties for the economic outlook, including prospects for global growth, particularly around China, global financial market conditions, dairy prices, net immigration, and pressures in the housing market.
The RBNZ added that further easing may be appropriate, depending on the results of forthcoming economic data.
“Monetary policy will continue to be accommodative. Some further policy easing may be required over the coming year to ensure that future average inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data,” Wheeler said.
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