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McDermott: further policy easing for inflation stabilisation


Reserve Bank assistant governor and head of economics, Dr John McDermott, stated that his opinion towards a necessity of further economic easing had not changed as inflation indices for Q3 would be low. Dr McDermott gave his speech on Tuesday.


According to his words, further easing is necessary to accelerate growth of inflation in future and to stabilise it in a middle of a target range. Dr McDermott also noted that the latest economic indices had been matched with expectations in RBNZ. The bank expected consumer prices to rise in Q3 by 0.2%. Then it is expected that the inflation level will be at the lower line of the target range.


During his speech, where he analysed factors restraining inflation, he said that weak growth of global economy, low commodity prices and strong national currency had put a restraining impact on growth of prices. This happened despite strong economic growth in New Zealand.


Inflation in New Zealand has been remaining during the last two years below its target range 1%-3%. This situation remains despite rate cuts in 2015 and in March and August this year.


Strong economic growth in New Zealand did not put an impact on inflation and the bank reiterated a question about a necessity in further measures of stimulation of consumer prices and restraining growth of currency. A strong currency supports lower inflation level.


Experts say that the RBNZ is likely to cut rate in November, though Dr McDermott said that this step would not put an impact.