The Reserve Bank held its official cashrate at 1.75% today – as forecast by governor Adrian Orr – and he reiterated his view that the rate would stay at that level through 2019 & into 2020.
Mr Orr said: “Employment is around its sustainable level and consumer price inflation remains below the 2% midpoint of our target, necessitating continued supportive monetary policy. Our outlook for the official cashrate assumes the pace of growth will pick up over the coming year, assisting inflation to return to the target midpoint.
“Our projection for the New Zealand economy, as detailed in the August monetary policy statement, is little changed. While GDP growth in the June quarter was stronger than we had anticipated, downside risks to the growth outlook remain.
“Robust global economic growth & a lower $NZ exchange rate is expected to support demand for our exports. Global inflationary pressure is expected to rise, but remain modest. Trade tensions remain in some major economies, increasing the risk that ongoing increases in trade barriers could undermine global growth. Domestically, ongoing spending & investment, by both households & government, is expected to support growth.
“There are welcome early signs of core inflation rising towards the midpoint of the target. Higher fuel prices are likely to boost inflation in the near term, but we will look through this volatility as appropriate. Consumer price inflation is expected to gradually rise to our 2% annual target as capacity pressures bite.
“We will keep the official cashrate at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low & stable inflation.”
Attribution: Bank release.