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RBNZ maintains OCR unchanged at 3.5%; NZD level is 'unjustified and unsustainable'

FXStreet (San Francisco) - The Reserve Bank of New Zealand maintained its official cash rate unchanged at 3.5% according to a recent press release. The RBNZ also commented that the NZD is under pressure as "current level remains unjustified and unsustainable and continues to constrain growth in the tradables sector."

RBNZ expects "a further significant depreciation" in the NZD.

The central bank comments that "global economy growing at moderate rate although recent data suggests some softening in major economies," and "monetary policy is expected to remain supportive for longer in all the major economies."

Overall, the RBNZ confirms that the "growth in the New Zealand economy has been faster than trend over 2014," and it is "reducing unemployment and adding to demands on productive capacity."

Main quotes

The global economy is growing at a moderate rate although recent data suggests some softening in the major economies, apart from the United States. Monetary policy is expected to remain supportive for longer in all the major economies.

Growth in the New Zealand economy has been faster than trend over 2014, reducing unemployment and adding to demands on productive capacity

Lower commodity prices and increased global financial market volatility have taken some pressure off the New Zealand dollar. However, its current level remains unjustified and unsustainable and continues to constrain growth in the tradables sector. We expect a further significant depreciation.

CPI inflation remains modest, and was 1 percent in the year to September.

CPI inflation is currently at a low level despite above-trend growth. However, inflation is expected to increase as the expansion continues. A period of assessment remains appropriate before considering further policy adjustment.

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