New Zealand's central bank maintained its policy rate at 3.50 percent, as widely expected, but set the stage for further interest rate rises "at a later stage" as economic output is expected to grow at or above the economy's capacity and push up inflation to the bank's 2.0 percent target range.
The guidance by the Reserve Bank of New Zealand (RBNZ), which raised its rate by 100 basis points from March to July, is slightly more hawkish than in October when it merely said a "period of assessment remains appropriate before considering further policy adjustment."
With modest inflation pressures, the RBNZ expects the economic expansion to be sustained for longer than previously expected with a more gradual increase in interest rates.
The RBNZ repeated its criticism of the current exchange rate of the New Zealand dollar, saying it did not reflect the decline in export prices and "remain unjustifiably and unsustainably high. We expect to see a further significant depreciation."
New Zealand's consumer price inflation rose by only 1.0 percent in the third quarter, down from 1.6 percent in the second quarter while the country's Gross Domestic Product expanded by 0.7 percent in the second quarter from the first for annual growth of 3.9 percent, down from 3.8 percent.
The Reserve Bank of New Zealand issued the following statement by its governor, Graeme Wheeler: