New Zealand Likely to Leave Key Rate Unchanged

Encouraged by the signs of economic recovery, the Reserve Bank of New Zealand may keep its benchmark interest rate unchanged after bringing it to a record-low of 2.5 percent in April.

Indeed, although the New Zealand economy is expected to stay in recession throughout 2009, there are some signs pointing to future recovery. Consumer confidence was the strongest since September in late May, and businesses sentiment turned optimistic for the first time in eight months. Moreover, house sales grew for a second straight month in April and home building approvals increased for the second time in three months. However, this decision to keep rates unchanged will certainly raise some controversy, particularly among exporters and farmers who have been hit by a sharp deterioration in global demand, by the recent appreciation in the New Zealand dollar and by a drop in dairy prices.

Anna Fedec,
6/9/2009 6:15:53 PM