The Reserve Bank of New Zealand just cut interest rates and now the New Zealand dollar – known as the kiwi – is getting slammed.
In an announcement on Wednesday evening (Thursday morning in New Zealand), the RBNZ cut its official cash rate to 2.75% from 3%.
This move was expected by economists polled by Bloomberg.
Following the statement, the kiwi was falling against the US dollar after having rallied the previous 2 days.
In evening trade in New York, the kiwi was down about 0.9% against the dollar to around $0.6323.
In its statement, the RBNZ said, “A reduction in the [official cash rate] is warranted by the softening in the economy and the need to keep future average CPI inflation near the 2 percent target midpoint. At this stage, some further easing in the OCR seems likely.”
The RBNZ added:
Global economic growth remains moderate, but the outlook has been revised down due mainly to weaker activity in the developing economies. Concerns about softer growth, particularly in China and East Asia, have led to elevated volatility in financial markets and renewed falls in commodity prices. The US economy continues to expand. Financial markets remain uncertain as to the timing and impact of an expected tightening in US monetary policy.
Domestically, the economy is adjusting to the sharp decline in export prices, and the consequent fall in the exchange rate. Activity has also slowed due to the plateauing of construction activity in Canterbury, and a weakening in business and consumer confidence. The economy is now growing at an annual rate of around 2 percent.