New Zealand holds interest rate at record low

WELLINGTON: The New Zealand central bank kept its base rate at a record low 1.75 per cent yesterday with no sign of a change in the near future.

Governor Graeme Wheeler, who retires next month, said economic growth was expected to improve in the coming months supported by strong population growth and the government spending detailed in the May budget.

But he said headline inflation

Longer-term inflation expectations remain well anchored at around 2.0 per cent. Graeme Wheeler, New Zealand Governor

was likely to decline in coming quarters as the effects of higher fuel and food prices dissipate.

“Longer-term inflation expectations remain well anchored at around 2.0 per cent,” he said, which would place it in the middle of the targeted 1.0-3.0 per cent inflation band.

New Zealand’s base rate has remained unchanged since November last year, when it was cut from 2.0 per cent, and analysts do not expect any movement until mid2018 at the earliest.

“Monetary policy will remain accommodative for a considerable period,” Wheeler said although he added the caveat that “numerous uncertainties remain and policy may need to adjust accordingly.”

Wheeler said a lower New Zealand dollar was needed to increase tradables inflation and to help deliver more balanced growth. — AFP