New Zealand cuts interest rates to record low

As expected the New Zealand central bank Governor, Alan Bollard, has cut interest rates for the seventh consecutive time, as the recession has slowed exports and reduced business investment on the island.

The Reserve Bank of New Zealand has officially cut interest rates by 0.5 percent to a record low of 2.5 percent.

After 18 months of recession, the economy is still weak with confidence levels falling and unemployment rising. Mr Bollard said the official cash rate may still be used to stimulate the economy with the likelihood that the rate could be cut back further over the next few months.

Rates were first cut back in July 2008 and have been reviewed every six weeks but consumer spending has still not responded and, as a result, the Treasury has stated that the economy may not begin to grow until 2010 as business confidence fell to a 35-year low in the first quarter.

The cash rate is expected to be held to a maximum of 2.5 percent at least until the middle of next year. However, adjustments to monetary policy are expected to continue due to the increased tightening of the credit markets and shrinking economy.

Following the announcement, the New Zealand dollar fell from $0.5734 to $0.5646.

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