New Zealand’s central bank cut interest rates by 0.25 percent to a new record low of 2.0 percent on Thursday. The reduction was in line with market expectations, and the bank indicated more cuts may be required to spur the economy, reports BSS.
Weak global conditions and low-interest rates relative to New Zealand were placing upward pressure on the New Zealand dollar.
Graeme Wheeler, governor of the Reserve Bank of New Zealand
“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 tradable sector,” the bank said in a statement.
“This makes it difficult for the Bank to meet its inflation objective. A decline in the exchange rate is needed.”
The New Zealand dollar, however, jumped following the announcement by US$0.01 to hover around US$0.73.
“Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range,” the bank said.