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New Zealand cuts interest rates to record low 2.25 percent New Zealand cuts interest rates to record low 2.25 percent
(about 1 hour later)
WELLINGTON, New Zealand — New Zealand’s central bank has cut its benchmark interest rate to a record low 2.25 percent and said it could go lower yet as the country grapples with weak international growth and lower prices for its crucial dairy exports. WELLINGTON, New Zealand — New Zealand’s central bank cut its benchmark interest rate to a record low 2.25 percent Thursday and said the rate could go lower yet as the country grapples with weak international growth and lower prices for its crucial dairy exports.
The timing of the Reserve Bank’s quarter-point cut Thursday took many economists by surprise. Most had expected the bank to cut rates but to do it later in the year.
The New Zealand dollar fell more than 1 percent and was trading at US$0.665.
Reserve Bank Governor Graeme Wheeler said in a statement there had been a decline in inflation expectations and there was a risk those expectations became self-fulfilling.Reserve Bank Governor Graeme Wheeler said in a statement there had been a decline in inflation expectations and there was a risk those expectations became self-fulfilling.
New Zealand’s annual inflation rate is just 0.1 percent, well below the central bank’s target of between 1 and 3 percent. Lowering rates has traditionally been a method to increase inflation.
New Zealand has kept its interest rates higher than many nations since the 2008 global financial crisis.New Zealand has kept its interest rates higher than many nations since the 2008 global financial crisis.
Wheeler said domestic growth should be helped by strong performances in tourism, construction and immigration.
But he also listed continuing high immigration as a risk to the economy, along with higher house prices and the weakness in dairy farming.
He said further interest rate cuts may be required.
“The outlook for global growth has deteriorated,” Wheeler said in his statement, citing weaker growth in China and Europe.
The timing of the Reserve Bank’s quarter-point cut took many economists by surprise. Most had expected the bank to cut rates but to start later in the year.
The New Zealand dollar fell more than 1 percent and was trading at US$0.665.
Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.