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RBNZ's Spencer keeps rates on hold

RBNZ's Spencer keeps rates on hold, brings forward chance of first hike to June
By Rebecca Howard

Nov. 9 (BusinessDesk) - Acting Reserve Bank governor Grant Spencer kept the official cash rate unchanged at 1.75 percent but brought forward a potential rate hike to June 2019 from September that year and lifted its inflation forecast as it factors in the impact of new government policies and a weaker currency.

While the forecasts were rejigged, Spencer reiterated "monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly," he said in a statement.

Spencer said the bank incorporated preliminary estimates of the impact of new government policies in four areas: new government spending; the KiwiBuild programme; tighter visa requirements; and increases in the minimum wage. "The impact of these policies remains very uncertain," he said.

All 16 economists polled by Bloomberg predicted rates would remain unchanged but there had been a debate about whether the bank might alter its forecasts with emerging signs of inflation and a sharply weaker kiwi dollar than the bank expected.

The bank's forecasts show the OCR rising to 1.9 percent in June 2019, three months earlier than its prior projection. A full rate increase, however, is still signaled in March 2020 when the benchmark rate is forecast to be 2 percent. Interest rates are also slightly higher at the end of the forecast period, rising to 2.1 percent in June 2020 versus a prior forecast of 2 percent. The key rate is seen at 2.3 percent in December 2020.

The New Zealand dollar edged up after the statement and recently traded at 69.44 US cents from 69.25 cents immediately before its release.

(BusinessDesk)

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