WELLINGTON (Reuters) - New Zealand's central bank governor on Thursday cited a slowing in global economic growth as the reason the bank cut its official cash rate (OCR), adding that the outlook for interest rates looked balanced at the moment.
“The reason for the cut is global economic growth has slowed,” the bank governor, Adrian Orr, said in an address to a parliamentary committee.
“Growth has come off rapidly in Europe, in China, though that’s stabilized more recently, and Australia ... so key trading partners.”
The Reserve Bank of New Zealand (RBNZ) lowered the OCR to an all-time trough of 1.50 percent on Wednesday, and flagged the ongoing U.S.-China trade dispute as a major risk for New Zealand's economy.
"At the moment we see the outlook for interest rates as ... balanced," Orr told the committee.
The New Zealand dollar stumbled to a six-month low following the rate decision on Wednesday, while government bonds jumped, sending yields 5 to 7 basis points lower across the curve.
Orr told Reuters at the sidelines of the meeting that currency markets overnight had "behaved consistent with economic fundamentals”.
RBNZ has a dual mandate of keeping medium-term inflation between 1 and 3 percent and supporting maximum sustainable employment.
Orr said if the bank had left interest rates on hold, employment would have eased off.
“Inflation expectations are incredibly well anchored,” he added.
“As nominal inflation has come down ... the neutral interest rate has come down,” he said when asked why New Zealand has the lowest-ever rates.
(Reporting by Charlotte Greenfield; writing by Praveen Menon; editing by Jonathan Oatis and James Dalgleish)
