RBNZ Surprises, Cutting Rates 25bp to 8.00%

Daily Forex Fundamentals | Written by DailyFX | Jul 23 08 21:55 GMT |

An accelerating recession moved the Reserve Bank of New Zealand to cut interest rates by 25 basis points, putting benchmark borrowing costs at 8.00%. This is the first RBNZ rate cut since 2003. The accompanying release cited greater-than-expected risks to growth and tightening international credit conditions as primary catalysts for the decision. Borrowing a page from Australia's playbook, Governor Alan Bollard said that monetary policy has been "reasonably tight for some time, and is now restraining activity and medium-term inflation pressures." Bollard added that although recent spikes in oil and food prices will bring inflation to a peak near 5% this year, the slowing economy will act to bring price pressure to target levels in the medium term. Shaping expectations in a typically candid fashion, Bollard concluded by saying that "provided that the outlook for inflation continues to improve and there is no excessive exchange rate depreciation, we would expect to lower the OCR further." DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.