New Zealand's Official Cash Rate (OCR) remains at 1.75 percent and is expect to be kept at this level through 2019 and 2020, Reserve Bank Governor Adrian Orr said on Wednesday.
Employment is near its maximum sustainable level. However, core consumer price inflation remains below the 2-percent target mid-point, necessitating continued supportive monetary policy, Orr said in a statement.
Trading-partner growth is expected to further moderate in 2019 and global commodity prices have already softened, reducing the tailwind that New Zealand economic activity has benefited from, he said, adding the risk of a sharper downturn in trading-partner growth has also heightened over recent months.
"Despite the weaker global impetus, we expect low-interest rates and government spending to support a pick-up in New Zealand's GDP growth over 2019," the governor said.
Low-interest rates and continued employment growth should support household spending and business investment, he said, adding that government spending on infrastructure and housing also supports domestic demand.
As capacity pressures build, consumer price inflation is expected to rise to around the mid-point of the target range at 2 percent, Orr said.
There are upside and downside risks to this outlook. A more pronounced global downturn could weigh on domestic demand, but inflation could rise faster if firms pass on cost increases to prices to a greater extent, he said.
"We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment, and maintaining low and stable inflation," he added.
Employment is near its maximum sustainable level. However, core consumer price inflation remains below the 2-percent target mid-point, necessitating continued supportive monetary policy, Orr said in a statement.
Trading-partner growth is expected to further moderate in 2019 and global commodity prices have already softened, reducing the tailwind that New Zealand economic activity has benefited from, he said, adding the risk of a sharper downturn in trading-partner growth has also heightened over recent months.
"Despite the weaker global impetus, we expect low-interest rates and government spending to support a pick-up in New Zealand's GDP growth over 2019," the governor said.
Low-interest rates and continued employment growth should support household spending and business investment, he said, adding that government spending on infrastructure and housing also supports domestic demand.
As capacity pressures build, consumer price inflation is expected to rise to around the mid-point of the target range at 2 percent, Orr said.
There are upside and downside risks to this outlook. A more pronounced global downturn could weigh on domestic demand, but inflation could rise faster if firms pass on cost increases to prices to a greater extent, he said.
"We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment, and maintaining low and stable inflation," he added.
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