New Zealand Interest Rate Reaches Record Low at 2.5%

  April 30th, 2009 at 13:22, Andriy Moraru

New Zealand dollarThe Reserve Bank of New Zealand cut its benchmark interest rate from 3.0 percent to 2.5 percent to a record low level for the country’s economy.

New Zealand was one of the most punished countries by the global slump due to its commodity exporter economic profile and since July, the central bank has continuously cut the national interest rate from 5.75 percent to the current level of 2.50 percent and lowered taxes in order to ease the damages caused by recession. The New Zealand dollar and bonds have been certainly affected by lowered interest rates, since it obviously becomes less attractive for traders to keep investments in assets that have constant profit decreases.

The economists’ opinion indicate that the past and present Reserve Bank policy is leaving space for further cuts in the cash rate and that a reversal in this trend is not expected in the foreseeable future. New Zealand is facing its sixth quarter of recession, which immersed the country in the worst crisis for a period of more than 30 years, but even if the interest rates are constantly hitting record lows, they are still more attractive than other major economies’ rates, such as the Eurozone which is at 1.25 percent and the Japanese which is close to zero.

The NZD/USD remained stable while the NZD/JPY traded at 55.59 from 54.95.

If you have any questions, comments or opinions regarding the New Zealand Dollar, feel free to post them using the commentary form below.

2 Comments

  1. This is a disaster that will lead to a wave of inflation. If low interest rates created the housing bubble that started this economic collapse, then why does the entire world think that if they follow the same path that they will find economic growth?

  2. Low interest rates were combined with the lack of proper risk management. It is believed that the money will be given out more carefully now that’s why lower interest rates are so praised as anti-crisis measures.

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