The Reserve Bank has kept the Official Cash Rate (OCR) at 1%, unchanged from November - a decision in line with economist expectations.
The Reserve Bank commented that there has been a ‘soft momentum’ in economic growth in the early stages of 2020, but that it is expected to accelerate over the second half of the year. It also noted that global economic tensions have eased a little, but that the coronavirus outbreak was ‘an emerging downside risk’ - albeit, one that is likely to impact the economy only for a short time.
The Monetary Policy Committee says low interest rates are still necessary to keep employment and inflation at their target levels.
“The Committee agreed that recent developments were consistent with continuing to meet their inflation and employment objectives, but the coronavirus situation was a complicating factor given how quickly it was changing and the limited information available,” it said in its statement.
“The Committee discussed the reasons for an expected pick-up in growth over 2020, including monetary and fiscal stimulus and the high terms of trade.
“The Committee discussed alternative OCR settings and the various trade-offs involved. The Committee agreed that ongoing low interest rates were needed to keep inflation and employment close to their mandated targets.”
The next OCR decision from the Reserve Bank is expected at the end of March.