Reserve Bank warns risks to economy remain, as OCR is left at record low

Thursday, 8 November 2018

There's been a surprise drop in New Zealand's unemployment rate to a 10-year low.

The Reserve Bank has warned employment may have reached the 'maximum sustainable level', but maintained that interest rates will stay low until at least 2020.

On Thursday Reserve Bank governor Adrian Orr left the benchmark official cash rate unchanged at 1.75 per cent, as expected.

'We expect to keep the OCR at this level through 2019 and into 2020.'

Previously the central bank has said the next move in interest rates could be either up or down and while recent economic growth and employment figures have been stronger than expected, Orr maintained that there were risk to the economy.

'The pick-up in [economic] growth in the June quarter was partly due to temporary factors, and business surveys continue to suggest growth will be soft in the near term,' Orr said.

Reserve Bank governor Adrian Orr has previously said the next move in the official cash rate could be up or down.

'Employment is around its maximum sustainable level.'

While a strong labour market - unemployment fell to a 10 year low in the September quarter - would often build the case for interest rate increases, Orr said that core inflation remained below the middle of the bank's target, meaning interest rates meaning interest rates needed to continue to be 'supportive'.