New Zealand cuts rates to 6 percent

Prices remain robust for New Zealand exports, such as this field of hops in the Motueka Valley

WELLINGTON, New Zealand -- New Zealand's Reserve Bank cut its official cash rate by a quarter of a percentage point to 6 percent Thursday in what is likely to be the last cut in the current cycle.

Reserve Bank governor Don Brash said the main reason for cutting the rate was the slowing growth in New Zealand's main trading partners.

"This slowdown in global growth will have an adverse impact on demand for our exports, and is likely to reduce inflationary pressures in New Zealand," he said.

New Zealand interest rates have been relatively stable over the past year. The bank lifted the official cash rate by half a percentage point to 6.5 percent in May last year, and left it unchanged until last month, when it cut by a quarter of a percentage point to 6.25 percent on March 14.

Commodity prices still 'robust'

Brash said Thursday that world prices for New Zealand commodities remained "robust" and the exchange rate had fallen back since March.

"These unexpected developments, if they persist, could take much of the disinflationary sting out of weakening global demand," he said.

Brash noted also that New Zealand's labor market was "relatively tight" and significant parts of the economy were operating near to capacity.

"It is for these reasons that we are only cautiously moving the OCR (official cash rate) in the same direction as official interest rates in other countries," he said.

The New Zealand action followed a half a percentage point rate cut in the U.S. on Wednesday, and a similar half a percentage point cut by the Australian central bank on April 4. The RBNZ will next review rates on May 16.

Reserve Bank of New Zealand

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