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RBNZ Signals a Long Rate Pause

New Zealand’s central bank shifted to a neutral stance on interest rates and hinted it is prepared to lower them as plunging oil prices damp inflation globally. The currency fell to the lowest in almost four years.

“In the current circumstances, we expect to keep the OCR on hold for some time,” Governor Graeme Wheeler said Thursday in Wellington after keeping the official cash rate at 3.5 percent. “Future interest-rate adjustments, either up or down, will depend on the emerging flow of economic data.”

Wheeler, who last month signaled further policy tightening might be needed, now looks set to stretch an interest-rate pause into 2016. Yet he is reluctant to join counterparts in Canada and Denmark who cut rates this month because New Zealand’s economy is forecast to grow 3 percent this year and policy makers are wary of re-igniting house-price inflation.

Bloomberg [1]

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