2019.03.2621:30:00UTC+00New Zealand Keeps Official Cash Rate Unchanged At 1.75%

The Reserve Bank of New Zealand on Wednesday kept its Official Cash Rate at the record low of 1.75 percent for the 16th straight meeting.

The decision was in line with expectations following a 0.25 percent rate cut in November 2016.

The central bank has pared a collective 0.50 percent from its benchmark in the last 25 months, lowering the rate in six of the last 22 meetings after six straight sessions with no change.

Given the weaker global economic outlook and reduced momentum in domestic spending, the likely direction of the next OCR move is down, RBNZ Governor Adrian Orr noted.

Employment is near its maximum sustainable level, the bank said. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.

The global economic outlook has continued to weaken, in particular key trading partners including Australia, Europe, and China. This weaker outlook has prompted central banks to ease their expected monetary policy stances, placing upward pressure on the New Zealand dollar.

Domestic growth slowed in 2018, with softness in the housing market and weak business investment contributing.

"We expect ongoing low interest rates, and increased government spending and investment, to support economic growth over 2019. Low interest rates, and continued employment growth, should support household spending and business investment. Government spending on infrastructure, housing, and transfer payments also supports domestic demand," Orr said.

As capacity pressures build, consumer price inflation is expected to rise to around the mid-point of our target range at 2 percent.

The balance of risks to this outlook has shifted to the downside, the bank said. The risk of a more pronounced global downturn has increased and low business sentiment continues to weigh on domestic spending. On the upside, inflation could rise faster if firms pass on cost increases to prices to a greater extent.

"We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment and maintaining low and stable inflation," Orr said.