New Zealand central bank leaves interest rate unchanged

September 13th, 2012 - 2:24 pm ICT by IANS  

Wellington, Sep 13 (IANS) New Zealand’s central bank Thursday announced it would leave its interest rate unchanged at its historic low of 2.5 percent in the face of a poor global outlook.

Reserve Bank of New Zealand (RBNZ) governor Alan Bollard said New Zealand’s economic outlook remained broadly consistent with the situation when the bank released its last Monetary Policy Statement in June, reported Xinhua.

“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,” Bollard said in his last statement on the Official Cash Rate (OCR) as governor.

“Domestically, the bank continues to expect economic activity to grow modestly over the next few years.”

Housing market activity continued to rise, and repairs and reconstruction in the earthquake-battered Canterbury region was expected to further boost the construction sector.

“Offsetting this, fiscal consolidation is constraining demand growth, and the high New Zealand dollar continues to undermine export earnings and encourage substitution toward imported goods and services,” he said.

“Underlying annual inflation, which recently moved below 2 percent, is expected to settle near the mid-point of the target range (of 1 percent to 3 percent) over the medium term.

“It remains appropriate for the OCR to be held at 2.5 percent.”

The OCR has been fixed at 2.5 percent since March last year.

Bollard leaves his post at the RBNZ, where he has served as governor for 10 years, later this month.

He will take up the position of executive director of the APEC (Asia-Pacific Economic Cooperation) Secretariat in Singapore in January next year.

He is to be replaced at the RBNZ by former banking industry executive Rod Carr.

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