WELLINGTON, New Zealand: New Zealand's central bank held its key interest at 3 percent Thursday, noting a 7.1-magnitude earthquake 12 days ago had caused substantial disruption to the economy that will continue for some time.
The Reserve Bank also said that the domestic economy remains weak, with the household sector cautious, soft consumer spending and credit demand, and falling house sales.
The rate hold follows two successive quarter-point increases that lifted the rate to 3 percent from its record low of 2.5 percent, where it was held for 13 months to counter the worldwide recession.
"While the global and domestic economies continue to recover, the outlook has weakened since our June statement. We consider it appropriate at this point to keep the OCR on hold," said Reserve Bank Governor Alan Bollard.
"The earthquake that struck Canterbury on Sept. 4 has significantly disrupted economic activity and is likely to continue to do so for some time yet," he said in a statement.
Bollard also noted that expansion in the global economy appears to have slowed, "with forward indicators of US growth, in particular, deteriorating noticeably."
Despite the weakened outlook, the bank said it still expects that growth will progressively absorb current surplus capacity over the next few years.
But it signaled a clear slowing in the pace of rises in its official cash rate.
"Over time, it is likely that further removal of monetary policy support will be required," Bollard said. "The pace and extent of further OCR increases is likely to be more moderate than was projected in the June statement," he added. - AP
