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New Zealand Keeps Rate Unchanged As Expected

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New Zealand's central bank left its key interest rate unchanged after cutting the rate by 50 basis points in August.

The Monetary Policy Committee of Reserve Bank of New Zealand headed by Adrian Orr, on Wednesday decided to hold the Official Cash Rate at 1.0 percent.

The MPC observed that new information since August did not warrant a significant change to the monetary policy outlook.

The MPC assessed that employment was around its maximum sustainable level, and inflation remained within the target range but below the 2 percent mid-point.

However, global trade and other political tensions remain elevated and continue to subdue the global growth outlook, dampening demand for New Zealand's goods and services.

Low interest rates and increased government spending are expected to support a pick-up in domestic demand over the coming year.

Members said the interest rate cut in August has reduced the retail lending interest rates and lowered the exchange rate of currency. They expect a positive impulse to economic activity over the coming year from monetary and fiscal stimulus.

Nonetheless, members said there remains scope for more fiscal and monetary stimulus to underpin the economy and maintain inflation and employment objectives.

With sluggish economic activity set to restrain inflation and employment growth, Ben Udy, an economist at Capital Economics, said the RBNZ is likely to cut rates to 0.75 percent by early next year.

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