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New Zealand central bank keeps cash rate at 1.75%

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New Zealand central bank keeps cash rate at 1.75%

The Reserve Bank of New Zealand maintained its official cash rate at 1.75%, as global economic growth continues to improve.

The central bank noted that although global inflation remains subdued, there are signs of emerging pressures. Commodity prices have increased though little movement has been seen in agricultural prices.

GDP growth during the second half of 2017 eased but will likely gain strength due to an accommodative monetary policy along with government spending, high terms of trade and population growth. Labor market conditions are expected to further tighten. Housing inflation has been on the rise recently though the growth in housing credit has been moderate, Reserve Bank Governor Grant Spencer said in a statement.

Annual CPI inflation in December was 1.6%, lower than expected owing to weakness in manufactured goods prices, Spencer said. Oil and food prices have trended higher. On the other hand, traded goods inflation is expected to remain subdued during the forecast period. Non-tradeable inflation remained moderate but is expected to rise with increasing capacity pressures. Over CPI inflation is likely to move up toward the midpoint of the target range. In the longer term, it is expected to reach 2%.

Spencer said the central bank said it will maintain its accommodative monetary policy for a considerable period but may need to make adjustments as uncertainties remain.