- Graeme Wheeler, RBNZ Governor
Reserve Bank of New Zealand cut interest rates for the second time in six weeks and hinted further easing will likely be needed to underpin inflation as growth slows. Central bank Governor Graeme Wheeler is trying to stoke inflation from near zero to 2% goal as plunging dairy prices curtail export returns and farmer spending. Thus, economists now expect the RBNZ to proceed with cutting the official cash rate in the near term to help jumpstart consumer inflation while cushioning the nation's economy from a precipitous decline in dairy prices, New Zealand's main export. Whole milk powder prices plunged to $1,848 a tonne at the latest auction on GlobalDairyTrade compared with prices closer to $5,000 early last year. While the economy is currently growing at an annual rate of around 2.5%, supported by low interest rates, construction activity and high net immigration, the growth outlook has weakened since the central bank's forecasts in June, Wheeler said. Economic growth is forecast by the Bank of New Zealand and ANZ to slow to about 2% this year from 3.5% in 2014. The RBNZ will publish updated forecasts with its next policy decision on September 10. Wheeler said global growth remains moderate and there is "particular uncertainty" around the effect of an expected tightening in US monetary policy.
The Governor also pointed out that the New Zealand Dollar has fallen significantly since April. Yet, further depreciation is necessary to provide support to export sector and import competing sectors.
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