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New Zealand leaves rates on hold
WELLINGTON, New Zealand (CNN) -- New Zealand's central bank has again left interest rates on hold and says it expects them to stay unchanged in the period ahead. The decision was widely expected. The Reserve Bank of New Zealand's official cash rate is 5.75 percent, a rate it set on July 3. RBNZ Governor Alan Bollard said on Wednesday the bank's sense was that the risk for the future direction of interest rates was "evenly balanced." Under a policy targets agreement between the central bank and the New Zealand government, the bank now is targeting an average inflation rate of 1 to 3 percent over the medium term, compared with zero to 3 percent previously. Bollard said the new policy targets agreement gave the bank a "little more flexibility" in managing monetary policy. This suggests that more gradual rate moves are likely, with the cash rate likely to stay at 5.75 percent through the first half of 2003 unless the economy slows markedly, according to analysts. HSBC Australia senior economist Grant Fitzner said the bank's projection that 90-day bank bills would remain steady at around 6 percent was consistent with HSBC forecasts. Bullish forecastBut Fitzner said the central bank's production-based GDP growth outlook of 4.25 percent in 2002-03 was well above HSBC's own forecast of 3.8 percent. "The RBNZ's forecast is only achievable if we see growth of around 0.9 percent a quarter between now and March 2003," Fitzner noted in a commentary after the central bank released its decision. "Given the expectations of a soft third-quarter 2002 increase, after the 1.7 percent surge in the June quarter, this call appears overly optimistic," he said. New Zealand's stock market is down about a third of a percent in Wednesday afternoon trade, with the NZSE Top 40 at 1956.93. The New Zealand dollar is about half a percent weaker at 49.55 U.S. cents.
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