NZ cash rate steady amid coronavirus fear

The Reserve Bank of New Zealand has acknowledged fears that the coronavirus will hit the Kiwi economy while keeping the cash rate at 1.0 per cent.

The central bank governor, Adrian Orr, said on Wednesday the historically low rate has been maintained to keep employment and inflation on track.

"Employment is at or slightly above its maximum sustainable level while consumer price inflation is close to the two per cent mid-point of our target range," he said.

A Reuters poll of economists had expected RBNZ to hold rates.

The New Zealand dollar, which weakened on Tuesday ahead of the review, jumped by 0.8 per cent to $US0.6455 after the announcement.

The China-originated virus has left many New Zealand exporters without a market - and decimated Chinese tourism arrivals.

Orr said he was ready to act if the virus' impact lingered.

"We assume the overall economic impact of the coronavirus outbreak in New Zealand will be of a short duration, with most of the impacts in the first half of 2020," he said.

"Some sectors are being significantly affected. There is a risk that the impact will be larger and more persistent. Monetary policy has time to adjust if needed as more information becomes available."

Orr said he believed growth would pick up later in the year, partially owing to government infrastructure spending announcements.

"Economic growth is expected to accelerate over the second half of 2020 driven by monetary and fiscal stimulus, and the high terms of trade," he said.

Austrlaian Associated PressBack to Breaking News

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