RBNZ Keeps Interests Rate Low

By TraderVox.com

Tradervox.com (Dublin) – Reserve Bank of New Zealand indicated that it might continue with low interest rates through to mid next year, as it seeks to boost economy which has been weakened by slow global economic growth. Speaking to reporters in Wellington, the Reserve Bank Governor Alan Bollard said that New Zealand’s major trading partner economic outlook remains weak and that interest rates would remain lower in the short term. He also noted that the country’s outlook over the next one year remains stable.

Alan Bollard, who will be stepping down this month after ten-year tenure, signaled that the borrowing cost will remain low as through to mid-2013 due to the risks posed by the euro region’s fiscal crisis. The decision also considered the poor outlook for its other trading partners such as China. The market is waiting for the Graeme Wheeler’s interpretation of economic conditions; Wheeler will be replacing Bollard as RBNZ Governor. Dominick Stephens, who is the chief economist at Westpac Banking Corp, said that the guidance given in the by Bollard will have limited effects. He indicated that investors are waiting to get a clear understanding from Graeme Wheeler’s analysis.

According to RBNZ forecast in today’s statement, the 3-month bill yield will remain at 2.7 percent in the first quarter of next year. The monetary policy statement also indicated that the yield will increase to 2.8 by the end of 2013 and increase to 3.2 in 2014. Bollard further said that the domestic economy fiscal consolidation is diminishing demand growth as high New Zealand dollar undermines exports. In a separate report, Reserve Bank of New Zealand signaled the presence of hurdles in the economic outlook as unemployment remains high. The unemployment rate in the country rose to 6.8 percent in second quarter as compared to 6.7 percent in the first quarter.

This is the last statement Bollard has made as the RBNZ Governor as he steps down on Sept 25, to pave way for Graeme Wheeler, who returns home after 13 years at the World Bank.

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