New Zealand holds interest rate at historic low

Wellington, March 23 (IANS) New Zealand's central bank held its official cash rate (OCR) at a historic low of 1.75 per cent on Thursday, citing major challenges in the global economy.

Macroeconomic indicators in advanced economies have been positive over the past two months, but major challenges remained with ongoing surplus capacity in the global economy and extensive geo-political uncertainty, said Reserve Bank of New Zealand governor Graeme Wheeler.

Global headline inflation had increased, partly due to a rise in commodity prices, and monetary policy was expected to remain stimulatory, but less so going forward, particularly in the US, Xinhua news agency quoted Wheeler as saying.

The trade-weighted exchange rate has fallen 4 percent since February, partly in response to weaker dairy prices and reduced interest rate differentials, but further depreciation was needed to achieve more balanced growth.

Prices in the country's dairy sector had been volatile in recent auctions and uncertainty remained around future outcomes.

Monetary policy would remain accommodative for a considerable period.

"Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly," he said.

The OCR has been at 1.75 per cent since last November.

The RBNZ's next OCR review will be held on May 11.

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