MNI POLICY: RBNZ Repeats Dnside Risks To Growth Outlook Remain

--Leaves OCR Unchanged at 1.75%

By Sophia Rodrigues

     SYDNEY (MNI) - The Reserve Bank of New Zealand left the official cash rate

unchanged at 1.75% Thursday and reiterated the next move could be up or down.  

     Below are the key observations from the statement:

     --As flagged by MNI (Q2 GDP Leaves Downside Risk to RBNZ Policy, published

September 20), the RBNZ acknowledged that GDP in the second quarter was stronger

than their expectation but downside risks to the growth outlook remain. The RBNZ

said their projection for the economy, as detailed in the August Monetary Policy

Statement, is little changed. "We expect to keep the OCR at this level through

2019 and into 2020. The direction of our next OCR move could be up or down."

     -The RBNZ included "global trade tensions" in the one-page statement, which

indicates its significance to the monetary policy outlook and is a downside

risk. "Trade tensions remain in some major economies, increasing the risk that

ongoing increases in trade barriers could undermine global growth," the RBNZ

said. On the other hand, the RBNZ reiterated that robust global economic growth

and a lower New Zealand dollar exchange rate is expected to support demand for

New Zealand's exports.

     --There was no comment on construction but the RBNZ said ongoing spending

and investment by both households and government is expected to support growth.

     --The commentary on inflation was mostly unchanged. The RBNZ reiterated

that they will look through the volatility in inflation caused by higher fuel

prices which is likely to boost inflation in the near term.

     --The RBNZ repeated that employment is around its sustainable level but

consumer price inflation below the 2% target mid-point requires continued

supportive monetary policy. The central outlook is for pace of growth to pick up

over the coming year, the RBNZ said.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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