The Reserve Bank of New Zealand kept the nation's benchmark interest rates at the low record of 2.50% in the meeting held October 28 for the fourth straight meeting as economic recovery needs more support. On the other hand, the nation's trade balance deficit narrowed in September on declining imports that is reflecting weak demand.
The Reserve Bank said that it won't raise borrowing costs before the second half of next year as the economy still needs more support to recover from the financial crisis the worst since World War II. The bank added that there is no "urgency" to end the monetary policy stimulus at the current stage.
However, the bank's decision came meeting analyst's forecasts, while traders anticipated a rate hike especially that the economy managed to expand in the second quarter of this year that was followed by rising consumer and business confidence. It is obvious that the reserve bank didn’t want to affect economic recovery and at the same time stop the local currency gains against the American dollar that will be in the favor of exports.
An interest rates hike still anticipated by investors as house prices increased 7.9%, while property sales climbed 44% in September from a year earlier, worth mentioning that that the bank expected inflation to be within the target range over the medium term and the bank is working to keep the annual raise in prices between 1% and 3%, governor Bollard said.
Allan Bollard the Reserve Bank governor expected that recovery in economic activity will be based on the exceptional monetary policy that will support the economy to realize full recovery, while he added that such support remains "appropriate".
Bollard ensured that household spending is increasing gradually, while business spending remains weak and credit growth is subdued. Yet, government spending is supporting economic activity.
Moreover, a report today showed that the New Zealand trade balance deficit narrowed in September to the least in six years recording Nz$424 million compared with a previous deficit of NZ$725 million that was revised to NZ$719 million.
The trade deficit narrowed on declining imports that fell 27% recording NZ$3.25 billion in September from a previous revised NZ$ 3.46 billion from NZ$3.47 billion and it came less than the forecasted NZ$3.50 billion. On the other hand exports rose last month recording NZ$2.83 billion meeting expectations and it came better than the previous NZ$ 2.74 billion in August.
The nation's shipments dropped 11% in September from a year earlier as shipments of powder milk, cheese and butter that account for fifth of total exports slipped 18% due to low commodity prices, while the quantities of dairy exports jumped 56%. The increase in NZD value corroded exports earnings that is why the economy still missing the rule of the exports sector in economic recovery, having in mind that the New Zealand dollar gained 27% against its American counter part in the past six months.
Yet, Allan Bollard expects the nation's trade balance deficit to widen on the medium term.
The New Zealand dollar fell against its American counterpart and other major currencies after the release of the interest rate decision and it is traded at 0.7218 against the U.S dollar at 23:20 GMT, while it is trading around 2.0398 against the euro and trading around 2.2719 against the royal pound.
The Reserve Bank said that it won't raise borrowing costs before the second half of next year as the economy still needs more support to recover from the financial crisis the worst since World War II. The bank added that there is no "urgency" to end the monetary policy stimulus at the current stage.
However, the bank's decision came meeting analyst's forecasts, while traders anticipated a rate hike especially that the economy managed to expand in the second quarter of this year that was followed by rising consumer and business confidence. It is obvious that the reserve bank didn’t want to affect economic recovery and at the same time stop the local currency gains against the American dollar that will be in the favor of exports.
An interest rates hike still anticipated by investors as house prices increased 7.9%, while property sales climbed 44% in September from a year earlier, worth mentioning that that the bank expected inflation to be within the target range over the medium term and the bank is working to keep the annual raise in prices between 1% and 3%, governor Bollard said.
Allan Bollard the Reserve Bank governor expected that recovery in economic activity will be based on the exceptional monetary policy that will support the economy to realize full recovery, while he added that such support remains "appropriate".
Bollard ensured that household spending is increasing gradually, while business spending remains weak and credit growth is subdued. Yet, government spending is supporting economic activity.
Moreover, a report today showed that the New Zealand trade balance deficit narrowed in September to the least in six years recording Nz$424 million compared with a previous deficit of NZ$725 million that was revised to NZ$719 million.
The trade deficit narrowed on declining imports that fell 27% recording NZ$3.25 billion in September from a previous revised NZ$ 3.46 billion from NZ$3.47 billion and it came less than the forecasted NZ$3.50 billion. On the other hand exports rose last month recording NZ$2.83 billion meeting expectations and it came better than the previous NZ$ 2.74 billion in August.
The nation's shipments dropped 11% in September from a year earlier as shipments of powder milk, cheese and butter that account for fifth of total exports slipped 18% due to low commodity prices, while the quantities of dairy exports jumped 56%. The increase in NZD value corroded exports earnings that is why the economy still missing the rule of the exports sector in economic recovery, having in mind that the New Zealand dollar gained 27% against its American counter part in the past six months.
Yet, Allan Bollard expects the nation's trade balance deficit to widen on the medium term.
The New Zealand dollar fell against its American counterpart and other major currencies after the release of the interest rate decision and it is traded at 0.7218 against the U.S dollar at 23:20 GMT, while it is trading around 2.0398 against the euro and trading around 2.2719 against the royal pound.
