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New Zealand’s Official Cash Rate (OCR) was kept at 2.5 percent by the Reserve Bank of New Zealand (RBNZ) Governor Alan Bollard, saying that the bank is monitoring the Euro region for any signs of deterioration. “New Zealand’s trading-partner outlook remains poor, with several Euro area economies in recession,” Bollard said in a statement. “It remains appropriate for the OCR to be held at 2.5 percent.” The OCR has been untouched for 11 straight meetings, since March of last year, to allow for the economy’s recovery after its second largest city, Christchurch, was hit by the deadliest earthquake in 80 years.
Europe’s economic troubles worsened this week as Spanish borrowing costs reached unsustainable levels, and after its two regions signified that it would seek financial help from the government to pay their debts. With the situation in the Euro Zone getting out of hand, European Central Bank Council Member Ewald Nowotny said that there were arguments favoring to give the region’s rescue fund a banking license, which would enable it to have access to ECB lending. Such comment boosted demand for South
Pacific nation’s currencies.
Economic recovery in New Zealand has not been strong as initially anticipated, with a lagging rebuild in Canterbury and struggling retail sector as household demand weakened. But Bollard said that it should “grow modestly over the next few years,” as the rebuilding of earthquake-hit Christchurch is anticipated to boost the construction industry. He also adds that the economic outlook remains in line with that described in the June monetary policy statement, which is a forecast of 3 percent in 2014, slower than the 3.7 percent-projection in March. The June statement of monetary policy was written at a time when the Greece held a second general election, after the winners of the first elections failed to form a coalition
government.
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