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The Reserve Bank of New Zealand (RBNZ) released its interest rate decision on Wednesday. The RBNZ kept its interest rate unchanged at 3.50%. This decision was expected by analysts.
The RBNZ Governor Graeme Wheeler said that New Zealand's situation "is quite different from some of those countries that have changed monetary policy or cut interest rates" as New Zealand's economy is growing at 3.25%, perhaps 3.5%. He added that the country's economy is expected "to grow at those sorts of rates over the next two years".
That could mean that the RBNZ's monetary policy will remain unchanged until 2017.
Wheeler noted that inflation in New Zealand declines due to higher exchange rate, low global inflation and fall in oil prices. The RBNZ expects that the country's inflation will decrease to around zero in the first quarter.
The RBNZ governor pointed out that the exchange rate of the kiwi "remains unjustifiably high and unsustainable in terms of New Zealand's long-term economic fundamentals". "A substantial downward correction in the real exchange rate is needed to put New Zealand's external accounts on a more sustainable footing", he said.
Wheeler also said that monetary policy adjustments "will depend on the emerging flow of economic data", he added.
The central bank revised its inflation. Inflation is expected to be below 1.0% until March 2016, rising to 1.7% by early 2017.
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