RBNZ's Wheeler keeps OCR at 1.75%, doesn't anticipate moving any time soon
By Paul McBeth
March 23 (BusinessDesk) - Reserve Bank governor Graeme Wheeler kept the official cash rate unchanged at 1.75 percent, as
expected, and reiterated his view that the benchmark rate doesn't need shifting for the foreseeable future.
"Monetary policy will remain accommodative for a considerable period," Wheeler said in a statement. "Numerous
uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly."
Last month the Reserve Bank adopted a neutral stance on policy, signalling the OCR would go nowhere until the middle of
2019, while acknowledging risks in the housing market and US President Donald Trump's protectionist trade measures could
change the outlook.
Wheeler reiterated those concerns, saying "major challenges remain with on-going surplus capacity in the global economy
and extensive geopolitical uncertainty".
Economists aren't convinced the Reserve Bank will sit on its hands for another two years, with many predicting an
increase in the cash rate next year as inflationary pressures emerge. However, none of the 11 polled by BusinessDesk
were predicting a move today, with last week's gross domestic product figures showing the wet spring weighed more
heavily on economic growth than expected.
Wheeler today said December growth was weaker than expected, but that was in part due to temporary factors and the
outlook was still positive due to "on-going accommodative monetary policy, strong population growth, and high levels of
household spending and construction activity". He reiterated his view that the consumers price index is expected to head
to the bank's 2 percent mid-point target over the medium and said long-term inflation expectations was anchored around
that level.
The kiwi has dropped 2.9 percent against the greenback since the February review and was trading at 70.64 US cents from
70.50 immediately before the release. The trade-weighted index has dropped about 3.8 percent and was at 76.53 from
76.40, below the 79 average level expected for the first quarter.
Wheeler noted the decline since February as "encouraging" but said "further depreciation is needed to achieve more
balanced growth".
(BusinessDesk)
ends