Wellington, Sep 10 (IANS) New Zealand’s central bank on Thursday cut interest rates for the third time year, slicing 25 basis points off the official cash rate (OCR) to bring it to 2.75 New Zealand percent.
Reserve Bank of New Zealand (RBNZ) governor Graeme Wheeler said further cuts were likely in order to lift weak inflation figures, Xinhua news agency reported.
Global economic growth remained moderate, but the outlook had been revised down due mainly to weaker activity in the developing economies, Wheeler said in a statement.
“Concerns about softer growth, particularly in China and East Asia, have led to elevated volatility in financial markets and renewed falls in commodity prices,” he said.
“The US economy continues to expand. Financial markets remain uncertain as to the timing and impact of an expected tightening in the US monetary policy.”
The New Zealand economy was adjusting to a sharp decline in export prices, and the consequent fall in the exchange rate, while activity had also slowed as the reconstruction of the earthquake- battered Canterbury region levelled off.
“The economy is now growing at an annual rate of around two percent,” said Wheeler.
Factors supporting growth included robust tourism, strong net immigration, the large pipeline of construction activity in the largest city of Auckland and other regions, and lower interest rates and the depreciation of the New Zealand dollar.
“While the lower exchange rate supports the export and import- competing sectors, further depreciation is appropriate, given the sharpness of the decline in New Zealand’s export commodity prices, ” said Wheeler.
Headline consumer price inflation remained below the RBNZ’s target range of 1 percent to 3 percent due to the previous strength in the New Zealand dollar and the halving of world oil prices since mid 2014.
Headline inflation was expected to return to well within the target range by early 2016, as the petrol price decline dropped out of the annual inflation calculation and the exchange rate depreciation passes through into higher tradable prices.
The RBNZ has now cut the OCR by 25 basis points three times this year, with the first cut in June and the second in July.