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Macroeconomics: Bank of New Zealand is not eager to rise its rate
Yesterday at 8.00 p.m. GMT Reserve Bank of New Zealand left its rate unchanged at the level of 3%. Last time central bank rose percent rate by 0.25% on 29 July. Governor of Reserve Bank of New Zealand has stated that throughout future two years paces of percent increase will be more moderate than anticipated earlier.
Last economic data show slowing of growth rates in national economy. Business and private consumption is subdued now. Household loans and housing market are very infirm, house prices can show further moderate decline. Actually, house sales dropped in October by 36% in year term, and house prices showed grow only by 0.3% instead of 1.1% in October.
From the other side, economic activity of trading partners of New Zealand continues to increase. Restoration in such countries, as China, India and other Asia-pacific countries is steady and USA and UK economic rise is entrenching, which support commodities prices at their highs. Nonetheless global economic and commodities prices still face risks of decreasing.
In spite of definite increase rates moderation, high export volumes and earthquake repair orders, will push for more robust upturn. By our estimations real GDP upgrowth rates for 2010 will be 2.9%, which entails inflation rates uptick. Inflation was depressed last months and in 2010 Q3 constituted 1.5% in year term.
Further percent rate growing will depends on clear signals of inflation paces rise and increase of national economy turn to sustainable path.
New Zealand dollar appreciated since the September versus USA dollar by 7% so that restrains export improvement and does not promote to development in tradable sphere. During last four months trading deficit was recorded. But there is opportunity? that last government measures on budget deficit decreasing will allow to ease pressure on New Zealand dollar and to escape from borrowing.
Common mood in central bank`s comments to this decision was mixed. From the moment of this news release the cost of New Zealand dollar almostly has not changed. We estimate this news as neutral for national currency of New Zealand. That is currency movements are possible in both directions in the short run. Support levels - 0.7414 and 0.7450, our resistance will be placed at 0.7560.