-Graeme Wheeler, RBNZ Governor
The Reserve Bank of New Zealand kept the official cash rate unchanged and held a more neutral setting on interest, saying that it is ready to cut rates as falling oil prices damp inflation worldwide. The RBNZ maintained its benchmark rate at 3.5%, noting that it expects keep rates unchanged for some time, probably stretching an interest-rate pause into 2016, and that future rates movements, either up or down, will be dependent on economic data. The central bank's Governor Graeme Wheeler reiterated that even though the New Zealand Dollar has depreciated recently, the local currency remains "unjustified in terms of current economic conditions, particularly export prices, and unsustainable in terms of New Zealand's long-term economic fundamentals". The RBNZ's adoption of a neutral stance comes as inflation is predicted to slow sharply. Prices climbed just 0.8% in the final quarter of 2014 from the previous year, below the central bank's forecast of a 1% increase. As oil prices sharply drops, the nation's economy could be facing its first annual decline in consumer prices in 16 years.
In the meantime, New Zealand's trade deficit contracted in December, but less than expected. The gap shrank to $159 million in December from $285 million in the preceding month, according to Statistics New Zealand, coming in worse than an expected $75 million deficit. Exports declined 6.9% to $4.42 billion from a year earlier, while imports jumped 7.6% to $4.58 on year in December.
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