RBNZ Expects to Keep Rates at Record Low for Two More Years

Bloomberg.com — New Zealand’s central bank said it expects to keep interest rates at a record low for another two years as the outlook for economic growth weakens.

Reserve Bank Governor Adrian Orr held the official cash rate at 1.75 percent and left the door open to a cut if needed. “We expect to keep the OCR at this level through 2019 and into 2020, longer than we projected in our May statement,” he said Thursday in Wellington. “The direction of our next OCR move could be up or down.”

The central bank lowered its forecast for economic growth over the coming year amid a slump in business confidence, a cooler housing market and risks to New Zealand exports from global trade tensions. It pushed out its forecast for the first rate increase to the third quarter of 2020, a full year later than it predicted in May. The rate has been at 1.75 percent since the end of 2016.

Two-year swap rates fell to 2.05 percent — the lowest since October 2016 — and the kiwi dollar dropped almost half a U.S. cent. It traded at 67.07 cents at 11:30 a.m. in Wellington from 67.47 cents beforehand. In a media briefing following the decision, Orr said he was “very pleased” with the currency’s level, which he thought was close to fair value. […]