New Zealand’s central bank held interest rates at an all time low on Wednesday, as expected, signaling no immediate need to adjust monetary policy but room to do so if the coronavirus became a more persistent threat to economic growth.
RBNZ said the overall economic effects of the outbreak in New Zealand would be of a short duration, with most of the impact likely in the first half of 2020.
“Nevertheless, some sectors are being significantly affected,” RBNZ’s monetary policy committee said in a statement accompanying the rates decision. “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.”
Widespread global travel and work restrictions due to the coronavirus, which has so far killed more than 1,000 people and sparked a global health emergency, are putting the squeeze on New Zealand firms doing business in the world’s second-biggest economy.
Meat, dairy, timber and seafood exporters in New Zealand have faced cancellations in China, which is its single-biggest export market.
The New Zealand dollar soared by over 0.5% to $0.6440 after the announcement.
RBNZ said in its statement that economic growth is expected to accelerate over the second half of 2020 driven by monetary and fiscal stimulus, and the high terms of trade.