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Reserve Bank cuts cash rate

NZ Newswire logoNZ Newswire 9/11/2016 Sean Martin

The Reserve Bank has cut the official cash rate to a record low 1.75 per cent .

Governor Graeme Wheeler trimmed 25 basis points off the rate, the third such cut this year, at the last review of 2016.

Economists had been widely expecting the cut with most predicting it will signal the end of the easing cycle.

Mr Wheeler said the latest cut, along with other policy settings, should see growth strong enough to have inflation settle near the middle of its target range of 1-3 per cent.

He said annual inflation was expected to rise from the December quarter after a weak data in the September quarter.

But he said monetary policy would continue to be accommodative and numerous uncertainties remained, especially internationally.

The dollar, he said, remained higher than is sustainable for balanced economic growth and repeated his call for it to fall.

The currency has persistently remained higher than expectations as New Zealand's relatively upbeat economic outlook continues to make it attractive in an uncertain global environment.

The kiwi jumped to 73.37 US cents from 72.90 cents immediately before the release, and the trade-weighted index advanced to 79.11 from 78.59, 3 per cent higher than what the RBNZ is projecting for the December quarter.

In a nod to Wednesday's election result in the US which gave Donald Trump the presidency, Mr Wheeler said political uncertainty remains heightened and market volatility is elevated.

ASB's chief economist Nick Tuffley said the monetary policy statement was in line with its expectations and expect the central bank to keep rates on hold.

"It is not an economy that is crying out for urgent stimulus to boost inflation," he said in a note.

BNZ said the rate cut would not prompt it to make any changes to its interest rates.

Labour finance spokesman Grant Robertson said the rate cut was recognition by the Reserve Bank that families are struggling to get ahead.

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