- Graeme Wheeler, RBNZ Governor
The Reserve Bank of New Zealand signalled it is likely to slash interest rates again after it maintained them on hold following three consecutive reductions. The central bank kept rates at 2.75%, admitting that further actions might be required to reach their inflation target. RBNZ Governor Graeme Wheeler is concerned about turning up heat in an already hot Auckland housing market with lower borrowing costs, and also wants to keep ammunition on hand in case the global economic outlook deteriorates. At the same time, a strengthening New Zealand Dollar put Wheeler's attempts to return inflation to the 2% target midpoint for the first time since 2011 in jeopardy. The Kiwi Dollar gained as much as 9% versus the Greenback in the past month amid growing uncertainty over the timing of Fed's interest rate hike and as investors pared bets on an RBNZ rate reduction in October.
Inflation was at 0.4% last quarter and has been below the midpoint of the RBNZ's 1%-3% target band since late 2011, reflecting previous currency strength and precipitous decline in oil prices since mid-2014. In September, the central bank predicted consumer price growth to reach 2% by the third quarter of next year.
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