What the Reserve Bank said - Dec
The Reserve Bank today left the Official Cash Rate unchanged at 3.5 percent.
The global economy continues to grow at a moderate pace, though recent data suggest a softening in major economies other than the United States. Inflation remains below target in most of the advanced economies due to spare capacity and declining commodity prices. Monetary policy is expected to remain very supportive for some time.
New Zealand’s economic growth is running at an annual rate of around 3½ percent. While dairy prices have declined sharply, domestic demand has retained momentum, supported by the ongoing growth in consumption and construction activity. Interest rates are low by historical standards and continue to support domestic demand. The exchange rate does not reflect the decline in export prices this year and remains unjustifiably and unsustainably high. We expect to see a further significant depreciation.
CPI inflation remains modest, at 1 percent in the year to September. Weak global inflation, falls in international oil prices and the high exchange rate are the main influences. Inflation in the non-tradeables sector remains subdued with capacity pressures having less impact than usual.
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