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RBNZ cuts official interest rate by 25 bp to 2.0%

The RBNZ has cut its interest rate at a meeting on Thursday by 25 bp to 2.0% and has stated that the bank is going to continue monetary policy easing.


Market expectations regarding this step were strengthened after RBNZ had released its economic condition report. The report shows that the RBNZ is going to ease monetary policy in order to stabilise inflation to a target range.


According to forecasts of the experts, there is 97% likelihood of this step at the next meeting. Experts say that the central bank must not only to cut rate but also state about an intention to cut it in future if the bank wants to achieve growth of inflation and fall of national currency.


The high cost of NZD is a serious problem for the RBNZ. The average trading rate of the currency is above June expectations of the bank.


The second problem is a low inflation rate. A target range for inflation is 1%-3%. Yearly inflation still takes 0.4%. The central banks expect the inflation to lower this quarter, but it will rise in the next quarter.


The RBNZ has concerns over the growth of real estate in the country. Sharp fall of real estate can ricochet to financial stability. The desire to heat real estate market cutting interest rate is the main factor that influenced a decision to remain policy unchanged in June. However, the central bank suggested changing the amount of credit to security amount.