25 Jul 2013
RBNZ keeps rates at 2.5%, NZD remains high
FXstreet.com (Barcelona) - The RBNZ monetary policy decision, as widely expected, held rates steady at 2.5%.
The New Zealand Dollar appreciated from 0.7930 to 0.7960 on the release despite Governor Wheeler expects to keep cash rate at 2.50% during 2013, adding that the economy continues to grow, while underscoring that the removal of stimulus will have to happen in the future.
RBNZ official release
Reserve Bank Governor Graeme Wheeler said: “The global outlook remains mixed, with the euro area still in recession and signs of slower growth in China and Australia, but more positive recent indicators in the United States and Japan. Global debt markets have become more cautious due to uncertainty around the Federal Reserve’s anticipated exit from quantitative easing.
“Growth in the New Zealand economy is picking up and, although uneven, is becoming more widespread across sectors. Consumption is increasing and reconstruction in Canterbury will be reinforced by a broader national recovery in construction activity, particularly in Auckland. This will support aggregate activity and eventually help to ease the housing shortage.
“In the meantime rapid house price inflation persists in Auckland and Canterbury. As previously noted, the Reserve Bank does not want to see financial or price stability compromised by housing demand getting too far ahead of the supply response.
“Despite having fallen on a trade-weighted basis since May 2013, the New Zealand dollar remains high and continues to be a headwind for the tradables sector, restricting export earnings and encouraging demand for imports. Fiscal consolidation will weigh on aggregate demand over the projection horizon.
“CPI inflation has been very low over the past year, reflecting the high New Zealand dollar and strong international and domestic competition. However, inflation is expected to trend upwards towards the mid-point of the 1-3 percent target band as growth accelerates over the coming year.
“The extent of the monetary policy response will depend largely on the degree to which the growing momentum in the housing market and construction sector spills over into inflation pressures.
“Although removal of monetary stimulus will likely be needed in the future, we expect to keep the OCR unchanged through the end of the year.”
The New Zealand Dollar appreciated from 0.7930 to 0.7960 on the release despite Governor Wheeler expects to keep cash rate at 2.50% during 2013, adding that the economy continues to grow, while underscoring that the removal of stimulus will have to happen in the future.
RBNZ official release
Reserve Bank Governor Graeme Wheeler said: “The global outlook remains mixed, with the euro area still in recession and signs of slower growth in China and Australia, but more positive recent indicators in the United States and Japan. Global debt markets have become more cautious due to uncertainty around the Federal Reserve’s anticipated exit from quantitative easing.
“Growth in the New Zealand economy is picking up and, although uneven, is becoming more widespread across sectors. Consumption is increasing and reconstruction in Canterbury will be reinforced by a broader national recovery in construction activity, particularly in Auckland. This will support aggregate activity and eventually help to ease the housing shortage.
“In the meantime rapid house price inflation persists in Auckland and Canterbury. As previously noted, the Reserve Bank does not want to see financial or price stability compromised by housing demand getting too far ahead of the supply response.
“Despite having fallen on a trade-weighted basis since May 2013, the New Zealand dollar remains high and continues to be a headwind for the tradables sector, restricting export earnings and encouraging demand for imports. Fiscal consolidation will weigh on aggregate demand over the projection horizon.
“CPI inflation has been very low over the past year, reflecting the high New Zealand dollar and strong international and domestic competition. However, inflation is expected to trend upwards towards the mid-point of the 1-3 percent target band as growth accelerates over the coming year.
“The extent of the monetary policy response will depend largely on the degree to which the growing momentum in the housing market and construction sector spills over into inflation pressures.
“Although removal of monetary stimulus will likely be needed in the future, we expect to keep the OCR unchanged through the end of the year.”