RBNZ keeps official cash rate at 1%

  • RBNZ keeps official cash rate at 1%

RBNZ keeps official cash rate at 1%

Therefore, the New Zealand currency will be reacting mostly to outside news, especially those about the virus outbreak in China.

Chief Economist Dominick Stephens of Westpac also commented on the OCR (official cash rate) and Coronavirus situation that the central bank is likely to keep the rates unchanged for the rest of the year unless the health emergency turns into a more severe threat to the economy than previously estimated.

The statement issued after the bank's monetary policy committee's decision described the coronavirus outbreak as "an emerging downside risk".

He says there are early signs the rate of infection is slowing - which is encouraging for the Reserve Bank's view.

That is compared with the previous statements, where employment was said to be "around" the maximum sustainable level and inflation was "below" the target range.

"Economic growth is expected to accelerate over the second half of 2020 driven by monetary and fiscal stimulus, and the high terms of trade".

The economic impact of Covid-19 still looms - and Governor Adrian Orr says they assume parts of our economy will feel the pinch short-term.

The odds of a rate cut later this year have risen to more than 50% from about 40% at the start of 2020, swaps data show. There are also indications household spending growth will increase.

A return to positive growth territory for the manufacturing sector would limit worries over the outlook of the New Zealand economy, encouraging hopes of a stronger first quarter. "In addition, competitive pressures and recent subdued business confidence have suppressed business investment".

"Overall, the inflation environment is now looking a little firmer than the RBNZ had expected at the time of the last policy statement in November", said Satish Ranchhod, an economist at Westpac in Auckland.

Going forward, there are no more notable economic releases for New Zealand scheduled for this week and very few for the next week.