Wellington - New Zealand's central bank slashed its
benchmark interest rate Thursday by half a per cent to 2.5 per cent,
its seventh cut since July.
The so-called official cash rate (OCR) was already at its lowest
mark since it was introduced in 1999 and Reserve Bank governor Alan
Bollard signalled that he could keep it at or below the current level
until late 2010.
'We consider it appropriate to provide further policy stimulus to
the economy,' he said. 'The OCR could still move modestly lower over
the coming quarters.'
The bank has cut the rate by 5.75 per cent since July.
The annual inflation rate is now 3 per cent and Bollard said
developments since he last cut the interest rate in March pointed to
lower medium-term inflation than previously projected.
He blamed weaker global growth and 'an unwarranted tightening in
financial conditions via both higher long-term interest rates and a
stronger exchange rate than expected.'
Bollard said the world economy deteriorated further than expected
in the first quarter of the year.
'While monetary and fiscal policy responses in many countries have
been substantial and there are some signs of stabilization in some
countries, we still expect the adverse economic forces generated by
the crisis to remain dominant throughout 2009.
'The timing and extent of global recovery remain highly
uncertain.'
Bollard also said that while New Zealand had not experienced the
same 'extreme falls in economic activity as seen in a number of our
trading partners, it remains weak.' He said that business sentiment
was low, investment curtailed and employment reduced.
While lower interest rates and government stimulus measures will
support the New Zealand economy, 'the scale of the global financial
crisis and domestic adjustments underway are such that it is likely
to be some time before economic activity returns to robust and
healthy levels,' he said.
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