WELLINGTON: The Reserve Bank of New Zealand has cut interest rates for the second consecutive month and says more easing is likely.
The central bank cut the rate to 3%, citing a softer economic outlook and low inflation as the reason. The heavily farming-dependent economy has been hit by a sharp drop in dairy prices over the past year.
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Dairy exports make up around on third of the country’s exports, making the economy vulnerable to any volatility.
Since 2014, global diary prices have fallen by more than 60%. New Zealand is also affected by the slowdown of its major trading partner China – a big buyer of its dairy products.
Business and consumer sentiment stand at a three-year low and sluggish inflation has policy makers worried about an even bigger drag to the country’s economy. “At this point, some further easing seems likely,” RBNZ Governor Graeme Wheeler said in a statement.
He also said the bank’s growth outlook had deteriorated from its last policy statement in June as the construction activity to rebuild Christchurch after its 2011 earthquake “appears to have peaked”.
