- RBNZ
The Reserve Bank of New Zealand kept interest rates on hold, but said it may need to cut rates further as slowing global economic growth and a strong New Zealand Dollar prolong a period of tepid inflation. All bets are now on the RBNZ cutting the OCR to 2.0% in June. The RBNZ has already slashed the official cash rate five times in less than a year. The central bank is also concerned about the relative strength of the local currency, which is making exporters and import-exposed industries less competitive. The New Zealand Dollar advanced more than 1% following the central bank's decision.
In March, the RBNZ forecast inflation will return to 1% late this year, and reach the 2% target midpoint by early 2018. Consumer prices climbed just 0.4% in the year through March. Pressures in the housing market is one of the main threats to the domestic outlook, according to RBNZ Governor Graeme Wheeler. The central bank is monitoring the property market amid signs that prices in Auckland are increasing again. Wheeler is aware that lower borrowing costs could add fuel to housing demand and pose a risk to financial stability. On international perspective, flagging growth in China was being closely monitored, and the RBNZ was alert to weakness in other key economies.
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