RBNZ Leaves Rates Unchanged

26 July 2012 02:30 - Lucy Williams

RBNZ Leaves Rates Unchanged

The Reserve Bank of New Zealand has left its official cash rate on hold at 2.5 percent, the same rate since early 2011. There was no apparent indication of any urgent plans to alter this decision. The New Zealand economy is feeling the effects of the Eurozone’s sovereign debt woes. The country’s trading partners are also affected with central banks watching cautiously for any signs of decline.

The annual rate of inflation dropped to 1 percent earlier in the year falling into the RBNZ’s target band. It was originally necessary to drop the official cash rate in 2011 to support recovery efforts following the Christchurch earthquake.

Governor Alan Bollard said it was “appropriate” for the official cash rate to remain at 2.5 percent. This may be as a result of the continuing problems in the Eurozone following two Spanish regions possibly needing full-scale bailout and central government funding. Additionally the ban on betting against stock market declines has caused Europe’s worries to flare up once again. Governor Bollard stated that “New Zealand’s economic outlook remains consistent with that described the June monetary policy statement”.

Recent statistics have shown the New Zealand economy has been showing signs of modest growth but across the board activity is uneven. Household expenditure is still guarded; consumer and business confidence slightly lowers and the unemployment rate remains high.