New Zealand keeps rate on hold, sees inflation near target

    The Reserve Bank of New Zealand left its benchmark Official Cash Rate (OCR) unchanged at 2.5 percent, as widely expected, as inflation is expected to settle near the midpoint of the bank's target. 
    The RBNZ said the economic outlook was largely in line with its June statement and it expects the economy to grow modestly over the next few years, with repairs following earthquakes boosting the construction sector and the housing market improving as forecast.
    But these positive factors are offset by tight fiscal policy and a high New Zealand dollar that cuts into export earnings, the bank added.
    "Underlying annual inflation, which recently moved below 2 percent, is expected to settle near the mid-point of the target range over the medium term," the bank said, quoting outgoing Governor Alan Bollard who leaves the bank at the end of the month.

    Bollard will be replaced by Graeme Wheeler, former managing director of the World Bank.
    The RBNZ targets annual inflation of 1-3 percent and it has held the OCR steady since February last year. 
    New Zealand's second quarter inflation rate fell to 1.0 percent from 1.6 percent in the first quarter. 
    The economy expanded 2.4 percent in the first quarter from same quarter last year.
   
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