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NZ central bank cuts key rate for 6th time

NZ central bank cuts key rate for 6th time

New Zealand's central bank cut half a percentage point from the nation's key interest rate Thursday, dropping it to a record low of 3.0 percent from 3.5 percent in a further bid to halt the economy's slide into deeper negative growth.
"In New Zealand, the impact of difficult trading conditions is showing through clearly in reduced export revenues, weak business sentiment, and sharply curtailed investment and employment," Bank governor Alan Bollard said.
The country's current recession is expected to last until mid-2009, making it the worst since the 1970's oil shock, he noted.
But Bollard also warned the scale of the global financial crisis is such that "there is great uncertainty about future economic developments and there is a risk that the recovery may occur later and be more protracted than we anticipate."
The latest move takes the official cash rate to its lowest level since it was introduced by the central bank in 1999.
Bollard said he did not expect the bank's cash rate to drop to "the near-zero rates" of some other countries as "New Zealand needs to retain competitiveness in the international capital markets."
Westpac Bank chief economist Brendan O'Donovan said the 0.5 percent rate cut was "a bit less than the data justified" which meant Bollard "might be leaving a bit more in the hip pocket for later" reductions. "We think there will a cash rate low of 2 percent," he told National Radio.
With a "horrible" international financial scene and events moving so quickly, "no central bank is wedded to any particular forecast" of an upturn, O'Donovan said. That meant cash rates could be taken lower and "we think they will have to take them lower ... sooner rather than later."


Updated : 2021-04-17 23:37 GMT+08:00