Citing lower global growth, New Zealand’s Reserve Bank yesterday cut the nation’s benchmark interest rate by one-quarter point to an all-time low of 1.5 percent.
The cut brings New Zealand’s rate in line with Australia’s rate of 1.5 percent.
It was New Zealand’s first cut since November 2016, when the bank also cut the rate by one-quarter point.
Demand for New Zealand’s goods and services had slowed since the middle of last year as global economic growth moderated, the bank said, adding that employment was near the maximum sustainable level, but the outlook for employment growth was subdued.
The New Zealand dollar fell by about US$0.003 on the news and was trading at a little under US$0.66.
Reserve Bank Governor Adrian Orr said that inflation was lower internationally, thanks to things such as improved computing power and a more global labor market.
Interest rates would stay lower for longer, as they had before the 1970s, he added.
“If you want to call it a new normal, call it that,” he said. “I would suggest we are probably back to the original normal.”
New Zealand kept interest rates at higher levels than in many other developed nations after the 2008 global financial crisis, and even raised the benchmark rate to 3.5 percent in 2014, but since 2015 it has cut rates eight times.
The bank said that lower immigration rates had slowed the housing market and led to lower household spending.
Lower interest rates in other nations had also put upward pressure on the New Zealand dollar, which hurts exporters, it said.
Yesterday’s decision was the first made by a seven-person committee that includes Orr. Previously, the bank’s governor was solely responsible for the rate decision.
Orr said that the committee was unanimous in the decision.
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