WELLINGTON, Aug. 9 (Xinhua) -- New Zealand Official Cash Rate (OCR) remained at 1.75 percent and is expect to be kept at this level through 2019 and into 2020, Reserve Bank Governor Adrian Orr said on Thursday.
"While recent economic growth has moderated, we expect it to pick up pace over the rest of this year and be maintained through 2019," Orr said in a statement.
Robust global growth and a lower New Zealand dollar exchange rate will support export earnings, Orr said.
At home, capacity and labor constraints promote business investment, supported by low interest rates. Government spending and investment is also set to rise, while residential construction and household spending remain solid, he said.
The labor market has tightened over the past year and employment is roughly around its maximum sustainable level, and the unemployment rate is expected to decline modestly from its current level, the governor said.
Inflation will increase towards 2 percent over the projection period as capacity pressures bite. This path may be bumpy however, with one-off price changes from global oil prices, a lower exchange rate, and announced petrol excise tax rises expected, he said.
Risks remain to the government's central forecast. The recent moderation in growth could last longer. Low business confidence can affect employment and investment decisions. Conversely, there is a chance that inflation could increase faster if cost pressures can pass through into higher prices and impact inflation expectations, Orr said.
"We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment, and maintaining low and stable inflation," he added.