New Zealand’s central bank yesterday cut its benchmark interest rate to a record low of 1.75 percent, citing global uncertainty caused in part by US Republican presidential candidate Donald Trump’s shock election victory.
The Reserve Bank of New Zealand said it planned to trim its official cash rate by 0.25 points anyway, but reaffirmed the decision in the wake of Trump’s win.
“Political uncertainty remains heightened and market volatility is elevated,” bank Governor Graeme Wheeler said.
Photo: Bloomberg
Asked if he was referring to the US election result, Wheeler replied: “It’s one of the risks.”
“There’s uncertainty about a lot of things... We’ve seen a result overnight that has clearly surprised the market,” he added.
However, he said other political factors were also worrying the markets, including Brexit and Chinese President Xi Jinping’s (習近平) consolidation of power in Beijing.
Wheeler said another reason for the rate cut was New Zealand’s stubbornly low inflation, which has been below the bank’s 1 to 3 percent target for the past two years.
He said projections indicated this would soon change, meaning yesterday’s cut might be the last in the current easing cycle.
“At this stage, we think that we won’t need another cut, but if circumstances justified it, we’d look very closely at the data,” he said.
New Zealand’s economic growth has remained strong at 3.6 percent in 2015-2016, despite an international downturn in dairy, one of its major exports.
The New Zealand dollar has also defied expectations and remained buoyant, frustrating the central bank, which wants to bring it down to help exports.
Analysts were expecting the rate cut, which had been flagged several times by the central bank.
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