MNI: RBNZ Leaves Cash Rate Unchanged, Shifts Guidance - Text

     LONDON (MNI) - The Reserve Bank of New Zealand left is cash rate unchanged

Wednesday, but shifted its forward guidance, saying the next move in rates will

more likely be lower.

     The full text of the RBNZ's statement follows:

     Official Cash Rate unchanged at 1.75 percent 

     Release date 27 March 2019 

     The Official Cash Rate (OCR) remains at 1.75 percent. Given the weaker

global economic outlook and reduced momentum in domestic spending, the more

likely direction of our next OCR move is down.

     Employment is near its maximum sustainable level. However, core consumer

price inflation remains below our 2 percent target mid-point, necessitating

continued supportive monetary policy.

     The global economic outlook has continued to weaken, in particular amongst

some of our key trading partners including Australia, Europe, and China. This

weaker outlook has prompted central banks to ease their expected monetary policy

stances, placing upward pressure on the New Zealand dollar.

     Domestic growth slowed in 2018, with softness in the housing market and

weak business investment contributing.

     We expect ongoing low interest rates, and increased government spending and

investment, to support economic growth over 2019. Low interest rates, and

continued employment growth, should support household spending and business

investment. Government spending on infrastructure, housing, and transfer

payments also supports domestic demand.

     As capacity pressures build, consumer price inflation is expected to rise

to around the mid-point of our target range at 2 percent.

     The balance of risks to this outlook has shifted to the downside. The risk

of a more pronounced global downturn has increased and low business sentiment

continues to weigh on domestic spending. On the upside, inflation could rise

faster if firms pass on cost increases to prices to a greater extent.

     We will keep the OCR at an expansionary level for a considerable period to

contribute to maximising sustainable employment, and maintaining low and stable

inflation.

     Meitaki, thanks.

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

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