New Zealand's central bank stunned markets on Wednesday by cutting interest...
WELLINGTON - New Zealand’s central bank stunned markets on Wednesday by cutting interest rates a steep 50 basis points and even flagged the risk of going nuclear by taking rates below zero, a radical shift that drove its currency to three-and-a-half year lows.
“It is easily within the realms of possibility that we might have to use negative interest rates,” RBNZ Governor Adrian Orr told a news conference after its policy meeting. The committee drove home its dovish message by predicting there was no chance of a hike until late 2021, a lower for longer outlook that was also recently adopted by the Reserve Bank of Australia .
Growth in New Zealand’s near $200 billion economy has been running below-par in recent quarters as international trade frictions slowed global demand in a blow to factory activity and exports. Business and consumer confidence have also sunk, painting a gloomy outlook.Policymakers everywhere have been forced to consider more stimulus as fears grow over the broadening fallout of the U.S.-China trade dispute on the global economy.
Investors this week feared Beijing had opened a new front in the currency conflict by allowing its yuan to weaken past 7.0000 per dollar, pressuring competitors to follow suit. Those fears were underscored after Washington labeled China a currency manipulator in a dramatic escalation of the trade dispute between the world's biggest economies.
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