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New Zealand extends benchmark interest rate freeze to two years

[WELLINGTON] New Zealand's freeze on its benchmark interest rate extended to two years on Thursday, with the central bank saying there was little prospect of it moving from record lows until 2020.

The official cash rate (OCR) has been unchanged at 1.75 per cent since November 2016 as the Reserve Bank of New Zealand takes a hands-off approach to maintaining economic growth.

Governor Adrian Orr indicated there was no compelling reason for change.

"The OCR remains at 1.75 per cent. We expect to keep the OCR at this level through 2019 and into 2020," he said in a statement.

"We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation."

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Official data shows unemployment in the September quarter fell 0.5 points to 3.9 per cent, a 10-year low that Mr Orr described as "around its maximum sustainable level".

The economy grew 2.7 per cent in the 12 months to June, although Mr Orr said one-off factors were behind the strong result and there were downside risks in the short term.

He expected inflation - which hit 1.9 per cent in the 12 months to September 30 - to stabilise around the bank's 2.0 per cent target.

Mr Orr said the mixed data meant that when the base rate eventually moved, it could go up or down.

"There are both upside and downside risks to our growth and inflation projections," he said.

"As always, the timing and direction of any future OCR move remains data dependent."


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