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OCR stays, dollar jumps

Posted on 27 April, 2016

The Reserve Bank has kept the official cash rate at 2.25 per cent. In response, the Kiwi dollar leapt to just under US69c, up more than half a cent. It also rose by more than 1c against the Australian dollar. Graeme Wheeler, Reserve Bank governor, says inflation is expected to strengthen, but further policy easing “may be required to ensure that future average inflation settles near the middle of the target range”. Inflation is currently sitting at 0.4 percent, below the one to three percent target. The Reserve Bank predicts it won’t move back within the range until December. Wheeler adds that the Kiwi is “higher than appropriate” given a drop in New Zealand’s commodity export prices. He says “a lower New Zealand dollar is desirable to boost tradables inflation and assist the tradables sector”. The Kiwi is also currently trading at one New Zealand dollar to 76.22 yen.