The Reserve Bank of New Zealand on Thursday announced that it was holding its official cash rate on hold at 2.50 percent - broadly in line with expectations.
Reserve Bank Governor Graeme Wheeler said the decision was based on a firm economic outlook for New Zealand, although downside risks remain from the global economy.
"The global outlook remains mixed with disappointing data in Europe and some other countries, and more positive indicators in the United States and Japan," Wheeler said. "Global financial sentiment continues to be buoyant and the medium term outlook for New Zealand's main trading partners remains firm."
A plethora of economic data supports the decision to leave rates unchanged.
The ANZ consumer confidence index touched a three-year high in May, rising by 4.5 points from April to 123.7 points. According to the bank, the increase in confidence was likely driven by the improvement in the employment market and strong house prices.
"Growth in the New Zealand economy is picking up but remains uneven across sectors," Wheeler said. "Consumption is increasing and reconstruction in Canterbury continues to gather pace and will be reinforced by a broader national recovery in construction activity, particularly in Auckland. This will support aggregate activity and eventually help to ease the housing shortage."
Last month, Wheeler and the rest of the policy board intervened in the forex markets to weaken the overvalued New Zealand currency. Global sentiment also contributed to New Zealand's overvalued exchange rate, Wheeler said at the time.
"Despite having fallen over the past few weeks, the New Zealand dollar remains overvalued and continues to be a headwind for the tradables sector, restricting export earnings and encouraging demand for imports," Wheeler said. "Fiscal consolidation will continue to constrain aggregate demand over the projection horizon."
Output producer prices for New Zealand were up 0.8 percent in the first quarter of 2013 compared to the previous three months - beating expectations for a flat reading following the 0.1 percent decline in Q4.
Input producer prices also were up 0.8 percent on quarter versus forecasts for a 0.2 percent increase following the 0.3 percent contraction in the three months prior. On a yearly basis, output prices were up 0.1 percent and input prices were flat.
"Annual CPI inflation has been just below 1 percent since the September quarter of 2012, largely reflecting falling prices for tradable goods and services. While tradables inflation is likely to remain low, annual CPI inflation is expected to trend upwards through the forecast period.
New Zealand saw a merchandise trade surplus of NZ$157 million in April - shy of forecasts for a surplus of NZ$480 million following the surplus of NZ$732 million in March.
Exports were up a seasonally adjusted 2.2 percent to NZ$3.95 billion, while imports jumped a seasonally adjusted 7.4 percent to NZ$3.80 billion.
"Reflecting the balance of several forces, we expect annual GDP growth to accelerate to about 3.5 percent by the second half of 2014, and inflation to rise towards the midpoint of the 1 to 3 percent target band," Wheeler said. "Given this outlook, we expect to keep the OCR unchanged through the end of the year."
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Forex News
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.