OCR unchanged at 1.75 percent
Statement by Reserve Bank Governor Adrian Orr:
The Official Cash Rate (OCR) remains at 1.75 percent.
We expect to keep the OCR at this level through 2019 and into 2020. The direction of our next OCR move could be up or down.
Employment is around its sustainable level and consumer price inflation remains below the 2 percent mid-point of our target, necessitating continued supportive monetary policy. Our outlook for the OCR assumes the pace of growth will pick up over the coming year, assisting inflation to return to the target mid-point.
Our projection for the New Zealand economy, as detailed in the August Monetary Policy Statement, is little changed. While GDP growth in the June quarter was stronger than we had anticipated, downside risks to the growth outlook remain.
Robust global economic growth and a lower New Zealand dollar exchange rate is expected to support demand for our exports. Global inflationary pressure is expected to rise, but remain modest. Trade tensions remain in some major economies, increasing the risk that ongoing increases in trade barriers could undermine global growth. Domestically, ongoing spending and investment, by both households and government, is expected to support growth.
There are welcome early signs of core inflation rising towards the mid-point of the target. Higher fuel prices are likely to boost inflation in the near term, but we will look through this volatility as appropriate. Consumer price inflation is expected to gradually rise to our 2 percent annual target as capacity pressures bite.
We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation.
Meitaki, thanks.
UK PMI manufacturing finalized at 48.9, signs of a two-speed economy persisted
UK PMI Manufacturing was finalized at 48.9 in November, revised up from 48.3, down from October’s 49.6. Markit noted that output, new orders and employment all declined. Stocks depleted and purchasing reduced following Brexit delay.
Rob Dobson, Director at IHS Markit, which compiles the survey:
“November saw UK manufacturers squeezed between a rock and hard place, as the uncertainty created by a further delay to Brexit was accompanied by growing paralysis ahead of the forthcoming general election. Downturns in output and new orders continued amid a renewed contraction in exports. The pace of job losses also hit a seven-year high as firms sought to reduce overheads in the face of falling sales. Destocking at manufacturers and their clients following the latest Brexit delay was a major contributor to the weakness experienced by the sector. Inflationary pressures meanwhile showed signs of moderating further, with input costs falling slightly for the first time since March 2016.
“Signs of a two-speed economy persisted, with intensifying business uncertainty leading to a further steep drop in demand for machinery and equipment as firms cut back on investment, but rising demand for consumer goods suggests that households continue to provide some support to the economy.
“Manufacturers across all sectors will be hoping that the New Year brings clarity on the political, trade and economic fronts, providing a more certain foundation to plan and rebuild as the next decade begins.”
Full release here.