New Zealand keeps interest rates unchanged

by Richard Kilner

Story link: New Zealand keeps interest rates unchanged

The Reserve Bank of New Zealand today chose to keep interest rates unchanged, with the official cash rate retained at 8.25%.

Alan Bollard, the Reserve Bank’s governor, explained that the high rate, would not be lowered due to mounting inflationary pressures.

Consumer prices are predicted to rise by 3.4% in the year to March, significantly higher than the target set by the central bank of 1-3%.

Like other nations, including the UK, New Zealand is experiencing rapidly rising energy and food costs, piling the pressure on inflation, a problem exacerbated by the tight labour market.

The central bank has revised its growth predictions of the year to March 2009 downwards, to less than 2%.

The reasons behind the reassessment are the difficult global credit conditions coupled with a declining housing market.

Despite the economic slowdown Alan Bollard has insisted there is no need for a rate cut at present.