MNI POLICY: RBNZ On Hold, Sees Downside Coronavirus Risks

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of New Zealand kept interest rates

unchanged Wednesday as it sees growth accelerating later this year, although it

sees the emerging threat to both the domestic and global economy from the

coronavirus outbreak.

     has cited an expected acceleration of economic growth later this year in

its decision to leave its Overnight Cash Rate (OCR) unchanged at a record low

1.0%.

     As expected, the Monetary Policy Committee left the benchmark Official Cash

Rate at 1.00%, pointing to falling unemployment and inflation moving to 1.9%,

close to midway between the Bank's 2% to 3% target.

     --VIRUS RISK

     Addressing downside risks, the RBNZ said the emerging coronavirus outbreak

would impact negatively on the economy but would be limited to the first part of

2020, although the statement said there was a risk "the impact will be larger

and more persistent".

     "Monetary policy has time to adjust if needed as more information becomes

available," the RBNZ added

     Overall though, the RBNZ was upbeat over the economic outlook, saying "

growth is expected to accelerate over the second half of 2020 driven by monetary

and fiscal stimulus, and the high terms of trade".

     "The outlook for government investment is stronger following the

Government's announcements in December. There are also indications household

spending growth will increase."

     The RBNZ cut rates twice last year down from 1.75%, with a 50 basis point

move in August, and the Bank attributes the better economic outlook to the more

accommodative monetary policy and significant fiscal stimulus from the NZ

Government.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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