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New Zealand cuts interest rate to record low 1.75%

Thursday, November 10, 2016 - 06:41

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New Zealand's central bank cut its benchmark interest rate by 0.25 per cent to a record low of 1.75 per cent on Thursday, citing low inflation and uncertainty in international markets.

[WELLINGTON] New Zealand's central bank cut its benchmark interest rate by 0.25 per cent to a record low of 1.75 per cent on Thursday, citing low inflation and uncertainty in international markets.

"Political uncertainty remains heightened and market volatility is elevated," the bank said in a statement announcing the widely anticipated move.

While the bank's decision was made public on Thursday, it was taken prior to Donald Trump's shock win in the US presidential election Wednesday.

It hinted that the current cycle of rate cuts may be over, saying inflation should rise to the middle of the bank's 1.0-3.0 per cent target.

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However, the bank said it was ready to take further action of needed.

"Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to change accordingly," it said.

Reserve Bank governor Graeme Wheeler is scheduled to take a press conference later Thursday, where he is set to be asked about the impact on Trump's victory on international markets.

New Zealand's economic growth has remained strong at 3.6 per cent in 2015/16, despite an international downturn in dairy, one of its major exports.

The New Zealand dollar has also remained stubbornly high, despite the central bank's efforts to talk it down, helping keep inflation below target.

The currency rose 0.64 US cents to 73.59 US cents after the announcement.

Westpac economist Imre Speizer said it appeared the bank was taking a neutral stance on further rate reductions after the current round of cuts began in July 2014, when the benchmark rate was 3.50 per cent.

"This suggests a period of policy stability ahead," he said.

AFP

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