New Zealand’s central bank has thrown a curveball into the country’s election campaign, defying expectations to hold interest rates ahead of the November 7 election.
A hike was all but priced in by the market at Wednesday’s meeting of the Reserve Bank, but Governor Anna Breman instead made a casting vote in a 4-3 decision to hold steady at 2.75 per cent.
The decision comes despite headline inflation running at 3.7 per cent – well outside the bank’s target band – and forecast to top four per cent by year’s end.
Ms Breman justified the decision by pointing to the overseas factors fuelling inflation, and by arguing that a lift could hurt New Zealand’s fragile economy.
“New Zealand’s recovery could be stronger than expected but could also lose momentum if the global environment deteriorates or export strength does not flow through to jobs, incomes and household spending,” she said.
Where the committee did agree was that rate rises were coming, with Ms Breman warning Kiwi mortgage holders that “tighter monetary policy is likely to be required”.
The decision is great news for Prime Minister Chris Luxon’s coalition, which has campaigned on keeping interest rates low.
That’s despite the Reserve Bank’s warnings about the strength of the Kiwi economy, and a three per cent fall in the NZ dollar since September.
Australian Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national newswire and has been delivering accurate, reliable and fast news content to the media industry, government and corporate sector for 85 years. We keep Australia informed.
