N.Z. May Leave Key Rate Steady

New Zealand central bank Governor Alan Bollard may keep the benchmark interest rate unchanged for a second month as a recovery in the housing market and business confidence signals an end to the recession.
TradingEconomics.com, Bloomberg 7/29/2009 8:56:17 AM

The Reserve Bank of New Zealand will leave the official cash rate at a record-low 2.5 percent at 9 a.m. in Wellington tomorrow, according to all 10 economists surveyed by Bloomberg.

Bollard kept rates unchanged last month for the first time in a year, saying there were signs of stability in the global economy and prospects of slow and fragile” growth in New Zealand by the end of 2009. The nation’s currency has surged the past three months, threatening the pace of the recovery and sparking calls by exporters for Bollard to cut rates further.

The currency has strengthened 15 percent against the U.S. dollar the past three months to be the second-best performing of 15 major currencies tracked by Bloomberg. The rising exchange rate erodes the local dollar value of meat, cheese and butter exports, which make up 30 percent of the economy.

New Zealand’s economy began contracting in the first quarter of last year and is probably in its seventh quarter of recession, according to government forecasts.

The housing market may lead a recovery after second- quarter home prices rose for the first time since late 2007. There were 40 percent more property sales in June than a year earlier, the Real Estate Institute said on July 9.

Consumers are less pessimistic and business confidence recovered in the second quarter, the New Zealand Institute of Economic Research Inc. said this month.

A net 25 percent of companies surveyed last quarter said the economy will worsen over the coming six months compared with 65 percent three months earlier, the Wellington-based institute reported on July 7.

N.Z. May Leave Key Rate Steady