Interest rates stay low

The Reserve Bank this morning left the official cash rate (OCR) unchanged at 1.75% with many economists now believing interest rates will stay low until at least 2019.

In a statement, the central bank said global economic growth continued to improve.

Global inflation remained subdued but there were some signs of emerging pressures.

Commodity prices had increased, although agricultural prices are relatively soft.

International bond yields had increased since November but remain relatively low.

Equity markets have been strong, although volatility has increased recently.

``Monetary policy remains easy in the advanced economies but is gradually becoming less stimulatory,'' the Reserve Bank said.

The exchange rate had firmed since the November Monetary Policy Statement, due in large part to a weak US dollar.

New Zealand GDP growth eased over the second half of 2017 but was expected to strengthen, driven by accommodative monetary policy, a high terms of trade, government spending and population growth.

Labour market conditions continued to tighten. Compared to the November statement, the growth profile is weaker in the near term but stronger in the medium term.

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