Lower inflation expectation is the major reason for lower official interest rates, Reserve Bank of New Zealand Governor Adrian Orr said in response to an opinion piece from BusinessNZ chief executive Kirk Hope, released Friday.
“Global and domestic low inflation expectations sit as a key reason for lower global and domestic official interest rates,” Orr added.
The governor said, given the long and variable lags between setting the official interest rate and the impact on inflation and employment outcomes, decision making of RBNZ is deliberately forward looking.
Earlier this month, the central bank had reduced the rate by 50 basis points to 1.00 percent to spur growth.
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