Oct 28, 2009, 20:32 GMT
Wellington - New Zealand's Reserve Bank left its benchmark interest rate at a record low of 2.5 per cent on Thursday, with governor Alan Bollard saying he saw no urgency to begin withdrawing stimulus as the economy recovered from recession.
It was the fifth time he had made no change in the so-called official cash rate (OCR) during scheduled policy reviews since cutting it from 3 per cent in April.
Analysts saw a subtle hint of a change in the central bank's thinking after Bollard said, 'We expect to keep the OCR at the current level until the second half of 2010.'
He had earlier talked about keeping the rate at or below 2.5 per cent until late next year.
Bollard welcomed signs that economic activity was growing again as New Zealand's trading partners continued to rebound during the September quarter and financial market sentiment improved.
'However, there remain significant vulnerabilities and challenges to be worked through in many economies,' he said. 'This process could weigh on global growth going forward.'
While the New Zealand housing market had reversed some decline in prices and a very gradual increase in household spending appeared to be taking place, business spending remained weak and credit growth was very subdued, Bollard said.
He said the high level of the New Zealand dollar, which topped US 76 cents this week before falling back slightly, had limited the scope for exports to contribute to the recovery.
'The current composition of growth continues to raise questions about its sustainability. These concerns would intensify if credit growth began to propel stronger domestic demand.'
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