Archive | Interest rates

Reserve Bank holds cashrate at 2.5%

The Reserve Bank left the official cashrate unchanged at 2.5% today. Bank governor Graeme Wheeler said: “Global growth is set to recover in 2013, with economic indicators improving in many of our trading partners. Consistent with this, global financial market sentiment is positive, contributing to lower bank funding costs and some reduction in interest rates faced by households & firms in New Zealand.

“Domestically, recent data on business confidence & construction activity suggest gdp growth is recovering from the softness seen through the middle of last year. The Canterbury rebuild is gathering momentum and its impact will be felt more broadly in incomes & domestic demand. House price inflation has increased and we are watching this & household credit growth closely. The bank does not want to see financial stability or inflation risks accentuated by housing demand getting too far ahead of supply.

“Inflation remains subdued and is currently just below the bottom of the Reserve Bank’s inflation target range. This mainly reflects the impact of the overvalued $NZ. The high currency is directly suppressing inflation on traded goods, and is undermining profitability in export & import competing industries. At the same time, the labour market remains weak and fiscal consolidation is dampening growth.

“Overall, we expect economic growth to strengthen over the coming year, reducing spare capacity and bringing inflation slowly back towards the 2% target midpoint.”

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

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Reserve Bank sticks with 2.5% cashrate

The Reserve Bank left the official cashrate unchanged at 2.5% today.

Bank governor Graeme Wheeler said: “Economic growth has slowed in recent months and has been accompanied by low inflation & rising unemployment. However, over the next 2 years growth is expected to accelerate to between 2.5-3%/year.

“The global outlook remains soft but appears less threatening than was the case earlier in the year. The risk of severe near-term deterioration in the euro area has decreased and Chinese economic indicators have been more positive recently. However, uncertainty around the US fiscal position is constraining US growth.

“Repairs & construction in Canterbury continue to gather pace, and the housing market is strengthening, particularly in Auckland. Lower funding costs for New Zealand banks, along with increased competition for lending, have seen mortgage interest rates reduce.

“Dampening factors include the Government’s fiscal consolidation and continued cautiousness by households & businesses in their spending decisions. The high $NZ continues to be a significant headwind, restricting export earnings and encouraging demand for imports.

“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% target midpoint.

“Monetary policy remains focused on keeping future average inflation near the 2% target midpoint. The bank is closely monitoring indicators for any sign of further moderation and is mindful of recent downside surprises to employment & inflation outturns. With the reconstruction-driven pick-up in investment now clearly underway, the bank will also continue to watch for a greater degree of inflation pressure than is assumed.”

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Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

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Cashrate unchanged

Published 25 October 2012

The Reserve Bank left the official cashrate unchanged at 2.5% today.

Reserve Bank governor Graeme Wheeler said, in his first decision on the cashrate: “The global economy remains fragile, with further recovery heavily dependent on policy implementation. That said, market sentiment has improved from earlier in the year, suggesting the risks to the global outlook are more balanced.

“Domestically, GDP continues to expand at a modest pace. Housing market activity is increasing as expected, and repairs & reconstruction in Canterbury are boosting the construction sector. Offsetting this, fiscal consolidation is constraining demand growth and the high $NZ is undermining export earnings and encouraging substitution toward imported goods & services.

“While annual CPI inflation has fallen to 0.8%, the bank continues to expect inflation to head back towards the middle of the target range. We will continue to monitor inflation indicators, such as pricing intention & inflation expectation data, closely over coming months.”

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Attribution: Reserve Bank release, story written by Bob Dey for the Bob Dey Property Report.

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Bank hold cashrate at 2.5%

Published 13 September 2012

The Reserve Bank left the official cashrate unchanged at 2.5% today.

Reserve Bank Governor Alan Bollard said: “New Zealand’s economic outlook remains broadly consistent with that described in the June monetary policy statement. 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, the bank continues to expect economic activity to grow modestly over the next few years. Housing market activity continues to increase as forecast, and repairs & reconstruction in Canterbury are expected to further boost the construction sector. Offsetting this, fiscal consolidation is constraining demand growth and the high $NZ continues to undermine export earnings and encourage substitution toward imported goods & services.

“Underlying annual inflation, which recently moved below 2%, is expected to settle near the mid-point of the target range over the medium term.”

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Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

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Official cashrate stays at 2.5%

Published 26 July 2012

The Reserve Bank left the official cashrate unchanged at 2.5% today.

Reserve Bank governor Alan Bollard said: “New Zealand’s economic outlook remains consistent with that described in the June monetary policy statement.

“New Zealand’s trading partner outlook remains poor, with several euro-area economies in recession. There remains a limited risk that conditions in the euro area deteriorate very significantly. The bank continues to monitor the situation carefully given the potential for rapid change.

“Domestically, the bank continues to expect economic activity to grow modestly over the next few years. Housing market activity continues to increase as forecast, and repairs & reconstruction in Canterbury are expected to further boost the construction sector. Offsetting this, fiscal consolidation and the exchange rate are constraining demand growth.

“Underlying annual inflation, which recently moved below 2%, is expected to settle near the mid-point of the target range over the medium term.”

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Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

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Reserve Bank holds interest rate, expects smokers to lift inflation next year

Published 14 June 2012

The Reserve Bank today left the official cashrate unchanged at 2.5% today.

Reserve Bank Governor Alan Bollard said: “New Zealand’s economic outlook has weakened a little since the March monetary policy statement.

“Political & economic stresses in Europe, along with a run of weaker-than-expected data, have seen New Zealand’s trading partner outlook worsen. Furthermore, there is a small but growing risk that conditions in the euro area deteriorate more markedly than is projected in the June statement. The bank is monitoring euro-area developments carefully, given the potential for rapid change.

“Increased agricultural production and the weakened global outlook have driven New Zealand’s export commodity prices lower. The resulting moderation in export incomes, although partially offset by depreciation in the exchange rate, will weigh on economic activity in New Zealand. Fiscal consolidation is also likely to constrain demand growth going forward.

“Offsetting these negative influences, housing market activity continues to increase, supported by recent reductions in mortgage interest rates. In addition, repairs & reconstruction in Canterbury are expected to substantially boost construction sector activity in coming quarters. Aggregate gdp growth is projected to pick up slightly to just over 3% next year. Given this economic outlook, inflation is expected to settle near the mid-point of the target range.

“It remains appropriate for monetary policy to remain stimulatory.”

In a discussion in the monetary policy statement on inflationary prospects, the Reserve Bank said: “The projected pick-up in gdp growth is expected to eliminate current spare capacity over the coming year, causing non-tradable inflation to increase from its current subdued level. Increases in tobacco excise taxes, announced in the Budget, are also expected to add to non-tradable inflation. Offsetting this, falling commodity prices and the lagged impact of previous appreciation in the $NZ are expected to keep tradable inflation quite low. Overall, annual CPI inflation is expected to track close to the centre of the target band.

“The inflation forecast has been revised upwards from 2013 onwards. This upward revision, in part, reflects the direct inflation impact of the planned increases in tobacco excise taxes. This effect impacts sooner than does the negative indirect inflation impact of recent & projected falls in commodity prices.”

Link: June monetary policy statement

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Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

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Bollard holds to 2.5%, will look at acting if exchange rate stays high

Published 26 April 2012

The Reserve Bank left the official cashrate unchanged at 2.5% today, but said it would need to reassess settings if the exchange rate stayed high.

Bank governor Alan Bollard said: “Inflation is restrained and is expected to stay near the middle of the bank’s target range. The domestic economy is showing signs of recovery.  Housing market activity continues to increase and a recovery in building activity appears to be underway, as forecast. That recovery will strengthen as repairs & reconstruction in Canterbury pick up later in the year.

“However, the global outlook remains of concern. Near-term indicators have moderated and financial market sentiment is still fragile.

“The $NZ has stayed elevated despite recent falls in commodity prices. Should the exchange rate remain strong without anything else changing, the bank would need to reassess the outlook for monetary policy settings. For now, it is appropriate for the official cashrate to remain at 2.5%.”

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Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

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High dollar keeps cashrate down, but Bollard says it’s bad for NZ

Published 8 March 2012

The Reserve Bank left the official cashrate unchanged at 2.5% today.

Bank governor Alan Bollard said: “Inflation has settled near the middle of the bank’s target range and inflation expectations have fallen. The domestic economy is showing signs of recovery. Household spending appears to have picked up over the past few months and a recovery in building activity appears to be underway. That recovery will strengthen as repairs & reconstruction in Canterbury pick up later in the year. High export commodity prices are also helping to support a continuing recovery in domestic activity.

“Policy actions from a number of central banks have boosted global confidence. While encouraging, financial market sentiment remains fragile and risks to the global outlook remain. Furthermore, the easing in global monetary policy and resultant recovery in risk appetite has contributed to a marked appreciation in the $NZ.

“While helping contain inflation, the high value of the $NZ is detrimental to the tradable sector, undermines gdp growth and inhibits rebalancing in the New Zealand economy. Sustained strength in the $NZ would reduce the need for future increases in the official cashrate. Given the medium-term outlook for inflation, it remains prudent to hold the rate at 2.5%.”

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Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

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Bollard sticks with 2.5% cashrate

Published 26 January 2012

The Reserve Bank left the official cashrate unchanged at 2.5% today.

Bank governor Alan Bollard said: “Since the time of the Decembermonetary policy statement, financial market sentiment has improved slightly, with increased liquidity in European financial markets. However, the global economy remains fragile and risks to the outlook remain.

“World prices for New Zealand’s export commodities have remained elevated but the recent appreciation of the $NZ is reducing exporters’ returns. The European debt crisis has also increased the cost of international funding, which will likely pressure funding costs for New Zealand banks over the coming year.

“In the domestic economy, we continue to see modest growth. Over recent months there have been signs of a limited recovery in household spending and the housing market. Further ahead, repairs & reconstruction in Canterbury will also provide a significant boost for an extended period, though there may be further delays resulting from the aftershocks.

“Reassuringly, inflation pressures have remained well contained. Inflation has declined and now sits below 2%.

“Given ongoing uncertainty around global conditions and the moderate pace of domestic demand, it remains prudent to keep the cashrate on hold at 2.5%.”

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Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

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Bollard holds cashrate at 2.5%

Published 8 December 2011

The Reserve Bank decided today to hold the official cashrate unchanged at 2.5%.

Bank governor Alan Bollard said: “As foreshadowed in the September Monetary policy statement, global conditions have deteriorated. Continuing difficulties related to sovereign & bank debt in a growing number of European economies have resulted in high levels of volatility in financial markets. There has also been a softening in international economic activity, including in the Asia-Pacific region.

“Global developments are having some negative impact on New Zealand, though to date it has been limited. Business confidence has declined and investment spending is likely to remain weak for some time. In addition, tightness in international markets means funding costs for New Zealand banks will increase to some degree over the coming year.

“There remains a high degree of uncertainty around the global outlook and, as discussed in the scenario in this Statement, there is a risk that conditions weaken further.

“Domestically, economic activity continues to expand, though at a modest pace. Although off their peaks, export commodity prices remain elevated. In addition, the depreciation of the $NZ provides some support for the tradable sector of the economy. Over time, repairs & reconstruction in Canterbury will also provide a significant boost to demand for an extended period.

“Annual headline inflation is estimated to have returned within the bank’s 1-3% target band in the December quarter. Underlying inflation continues to sit close to 2%. In addition, wage & price-setting pressures have remained contained.

“Given the current unusual degree of uncertainty around global conditions and the moderate pace of domestic demand, it remains prudent for now to keep the official cashrate on hold at 2.5%.”

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Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

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