Wednesday, July 25, 2012

New Zealand holds rate, less pessimistic about euro crises

    The Reserve Bank of New Zealand (RBNZ) held its benchmark Official Cash Rate (OCR) unchanged at 2.50 percent, as expected, and said inflation was expected to settle around its target in the medium term and the domestic economy was expected to expand modestly over the next few years.
    Although the RBNZ said the outlook for its trading partners, including the euro zone, remains poor, the central bank struck a more optimistic tone about the outlook than many other central banks.
    "There remains a limited risk that conditions in the euro area deteriorate very significantly. The Bank continues to monitor the situation carefully given the potential for rapid change," the bank said.
    The RBNZ has held its key rate steady at a record-low 2.50 percent since February 2011 and New Zealand's inflation rate eased to 1.0 percent in the second quarter, down from 1.6 percent in the first quarter. The central bank targets inflation of 1-3 percent.

    “It remains appropriate for the OCR to be held at 2.5 percent," the central bank said in a statement, quoting Governor Alan Bollard.
    “Underlying annual inflation, which recently moved below 2 percent, is expected to settle near the mid-point of the target range over the medium term," he added.
    The bank said the economic outlook was consistent with its June monetary policy statement and reconstruction after the earthquakes was expected to boost the construction sector. This was offset by fiscal tightening and a firm exchange rate.


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