In New Zealand this morning a different, but expected decision to the Fed’s rise with the Reserve Bank of NZ sitting on its official cash rate at 1.75%.
Inflation remains weak, growth moderate, but the outlook has strengthened, according to the statement from the bank.
And the statement made it clear that rates are not going to rise anytime soon (like the Reserve Bank of Australia)
"Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly,” the statement concluded.
Acting governor Grant Spencer said economic growth had weakened at the end of 2017, and cited to a dip in agricultural production at the end of 2017, especially in the key dairying sector (because of the drought and as we saw the interim result from Fonterra with underlying profit down sharply – see separate story).
“Growth is expected to strengthen,” Spencer said, boosted by low interest rates, strong export income, government spending and population growth, and no doubt by the ending of the drought with Fonterra lifting its farmgate milk price by 15 cents a kilo of milksolids. That will pump close to $NZ300 million into the economy this year.
“GDP was weaker than expected in the fourth quarter, mainly due to weather effects on agricultural production, Mr Spencer said.
"Growth is expected to strengthen, supported by accommodative monetary policy, a high terms of trade, government spending and population growth. Labour market conditions are projected to tighten further.
"Residential construction continues to be hindered by capacity constraints. The Kiwibuild programme is expected to contribute to residential investment growth from 2019. House price inflation remains moderate with restrained credit growth and weak house sales.
CPI inflation is expected to weaken further in the near term due to softness in food and energy prices and adjustments to government charges. Tradables inflation is projected to remain subdued through the forecast period.
"Non-tradables inflation is moderate but is expected to increase in line with a rise in capacity pressure. Over the medium term, CPI inflation is forecast to trend upwards towards the midpoint of the target range. Longer-term inflation expectations are well anchored at 2 percent,” the statement said.
