RBNZ’s Wheeler Likely to Signal Rate Pause

New Zealand’s central bank, the first in the developed world to raise interest rates this year, is finding inflation less menacing than it anticipated as milk and oil prices plunge.  Reserve Bank Governor Graeme Wheeler will signal a prolonged interest-rate pause when he delivers his latest monetary policy statement tomorrow, economists say. With inflation at the bottom of his target band, and lower than when he started raising rates, the governor’s fledgling tightening cycle may already have come to an end.

“There is a chance they won’t need to hike again,” said Nick Tuffley, chief economist at ASB Bank in Auckland, who expects rates to be kept on hold for a year. “Further rate increases are a matter of if as much as when.”

When he started raising borrowing costs in March from a record low of 2.5 percent, Wheeler envisaged at least 200 basis points of tightening over two years. He paused in September with 100 points completed as a strong New Zealand dollar, falling oil prices and a weak global economy pushed annual inflation to just 1 percent in the third quarter, half the 2 percent midpoint of his 1-percent-to-3-percent target range.

Bloomberg

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