Investing.com - Reserve Bank of New Zealand policymakers held interest rates at 5.50% on Wednesday, as current interest rates continue to control economic activity and alleviate inflationary pressures.
Officials noted that while the growth of the gross domestic product (GDP) in the June quarter exceeded expectations, the overall economic growth forecast remains modest. With monetary conditions staying restrictive, a further decline in spending growth is anticipated.
By 12:30pm AEDT (1:30am GMT), the NZX 50 was down by 1% to 11,122.5 while the NZD/USD shed 0.4% to 0.5882.
Internationally, economic growth continues to lag, with headline inflation easing for most of New Zealand's trading partners. Core inflation has also seen some reduction, albeit to a lesser extent. The decreasing global demand is exerting a downward force on New Zealand's export volumes and prices, with global import prices, excluding oil, also seeing a decline.
Although the imbalance between supply and demand in the New Zealand economy continues to ease, it was noted that a protracted period of restrained activity is necessary to decrease inflationary pressures.
Risks in the near term include the possibility that activity and inflation do not slow as much as required. Over the medium term, policymakers noted the potential for a more significant slowdown in global economic demand, particularly in China, which could put additional pressure on commodity prices and New Zealand's export revenue.