New Zealand cuts interest rate by 100 basis points to 6.50%. | CountingPips Forex Blog

October 22, 2008 - Forex Economic News

New Zealand cuts interest rate by 100 basis points to 6.50%.

The Reserve Bank of New Zealand reduced its interest rate by 100 basis points or one full percentage point today according to a government release. The rate reduction brought the official cash rate from 7.50 percent to 6.50 percent and follows a reduction by 50 basis points in September and by 25 basis points in July. The rate cut was widely expected by economists as the New Zealand economy has been contracting since the beginning of this New Zealand cuts interest rate year. The New Zealand Gross Domestic Product declined by 0.3 percent in the 1st quarter and by 0.2 percent in the 2nd quarter.

Reserve Bank Governor Alan Bollard stated in the release that, "ongoing financial market turmoil and a deteriorating outlook for global growth have played a large role in shaping today’s decision. Economic activity in New Zealand will be further constrained, relative to the outlook presented in our September Monetary Policy Statement, by these international developments. New Zealand can expect to face lower demand for exports and credit is likely to be less readily available."

The RBNZ rate cut was unprecedented as today's reduction was the first time the RBNZ had cut the rate by 100 basis points since 1999 when the bank adopted its official cash rate policy. The bank statement also stated that more rate cuts may be to come if inflationary pressures ease as Bollard stated, "Should the outlook for inflation evolve as projected we would expect to lower the OCR further. However, the timing and extent of OCR reductions over the coming months will depend on evidence of actual reductions in domestic cost pressures as well as how the global financial developments play out." The next RBNZ rate announcement is scheduled for December 4th.

tags: interest rates, RBNZ, New Zealand

Blog Index