"The high exchange rate is adding further pressure to the export and import-competing sectors and, together with low global inflation, is causing negative inflation in the tradables sector ".
-RBNZ
On Wednesday, at the conclusion of RBNZ August monetary meeting the Reserve Bank of New Zealand cut interest rates by 25 basis points, taking the deep of a record-low rate equalling 2%. The decision made by Reserve Bank of New Zealand met market expectations by delivering a rate cut and hinted that more monetary policy easing might be added in future. Nevertheless, some economists still were expecting RBNZ to cut harder, with the Kiwi dollar going down as soon as the decision was announced. Moreover, according to the RBNZ, the annual inflation rate is expected to begin recovering during the last quarter of this year. Also, the RBNZ pointed out, that firm actions could be started until early 2017, hinting the central bank will wait at least some time in order to reassess the necessity of another cut. The officials said the buoyant housing market resumes to pose financial stability risks and promised to consult on stronger macro measures. It is worth to point out, the RBNZ has another challenge alike as the Australia's RBA in lowering interest rates - managing the rising risks of a housing bubble.
In the meantime, despite the talks the exchange rate is too high, while inflation too low, the signals that more easing is coming in near future, the New Zealand dollar advanced following the rate cut, jumping to its highs of .7341 after the decision.
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