New Zealand Treasury said in its monthly report that economic growth was “weaker than forecast” in the June quarter. Business activity “remained weak” in the September quarter and is expected to have weighed on domestic growth. Inflation was “stronger than expected” but a “slowing economy poses downside risk to forecasts”.
Treasury also said the nominal neutral interest rate (NIR) has been falling over time in many developed nations, including New Zealand. It revised down the terminal nominal NIR assumption from 3.75% to 3.0%. And, “a lower NIR assumption implies low interest rates have less stimulatory power than previously assumed”.
