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NZ cuts interest rates to record low

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The New Zealand Reserve Bank has unexpectedly cut the official cash rate to a record low 2.25 per cent.

Governor Graeme Wheeler trimmed the official cash rate by 25 basis points on Thursday and signalled in his monetary policy statement that more cuts were possible.

Low inflation and flagging dairy prices had some urging the bank to reduce the rate, but most bank economists had predicted the rate would remain on hold.

The NZ dollar fell more than a cent against the greenback after the move.

Mr Wheeler said more downward movement may be needed.

"Further policy easing may be required to ensure that future average inflation settles near the middle of the target range," he said.

The bank is tasked with keeping inflation within a one-to-three per cent band and Mr Wheeler said that, while long-term inflation was projected to sit at around two per cent, it would take longer to reach its target.

"There has been material decline in a range of inflation expectation measures," he said.

"This is a concern because it increases the risk that the decline in expectations becomes self-fulfilling and subdues future inflation outcomes.

"Monetary policy will continue to be accommodative."

Last month, the bank's quarterly survey of expectations showed firms perceptions of inflation were at their lowest since 1994.

The New Zealand dollar dropped to 66.63 US cents from 67.77 cents immediately before the statement.


Real Estate Investar Editor
Real Estate Investar Editor
Real Estate Investar provides intelligent software, tools and data to help you save time and make money in the residential property investment market.

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