Official Cash Rate reduced to 2.0 percent
The Reserve Bank yesterday (Wednesday) reduced the Official Cash Rate (OCR) by 25 basis
points to 2.0 percent.
Global growth is below trend despite being supported by unprecedented levels of monetary stimulus.
Significant surplus capacity remains across many economies and, along with low commodity prices,
is suppressing global inflation.
Some central banks have eased policy further since the June Monetary Policy Statement, and long-term
interest rates are at record lows. The prospects for global growth and commodity prices remain uncertain.
Political risks are also heightened.
Weak global conditions and low interest rates relative to New Zealand are placing upward pressure on the
New Zealand dollar exchange rate. The trade-weighted exchange rate is significantly higher than assumed
in the June Statement. The high exchange rate is adding further pressure to the export and import-competing
sectors and, together with low global inflation, is causing negative inflation in the tradables sector. This makes
it difficult for the Bank to meet its inflation objective. A decline in the exchange rate is needed.
Domestic growth is expected to remain supported by strong inward migration, construction activity, tourism,
and accommodative monetary policy.
However, low dairy prices are depressing incomes in the dairy sector and reducing farm spending and investment.
High net immigration is supporting strong growth in labour supply and limiting wage pressure.
Read More Here:
The Reserve Bank yesterday (Wednesday) reduced the Official Cash Rate (OCR) by 25 basis
points to 2.0 percent.
Global growth is below trend despite being supported by unprecedented levels of monetary stimulus.
Significant surplus capacity remains across many economies and, along with low commodity prices,
is suppressing global inflation.
Some central banks have eased policy further since the June Monetary Policy Statement, and long-term
interest rates are at record lows. The prospects for global growth and commodity prices remain uncertain.
Political risks are also heightened.
Weak global conditions and low interest rates relative to New Zealand are placing upward pressure on the
New Zealand dollar exchange rate. The trade-weighted exchange rate is significantly higher than assumed
in the June Statement. The high exchange rate is adding further pressure to the export and import-competing
sectors and, together with low global inflation, is causing negative inflation in the tradables sector. This makes
it difficult for the Bank to meet its inflation objective. A decline in the exchange rate is needed.
Domestic growth is expected to remain supported by strong inward migration, construction activity, tourism,
and accommodative monetary policy.
However, low dairy prices are depressing incomes in the dairy sector and reducing farm spending and investment.
High net immigration is supporting strong growth in labour supply and limiting wage pressure.
Read More Here:
Have an INVESTOR Mindset, but Trade like an ENTREPRENEUR