Question

Official Cash Rate unchanged at 1.75 percent

08 November 2018

The Official Cash Rate (OCR) remains at 1.75 percent. We expect to keep the OCR at this level through 2019 and into 2020. There are both upside and downside risks to our growth and inflation projections. As always, the timing and direction of any future OCR move remains data dependent. The pick-up in GDP 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. Employment is around its maximum sustainable level. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy. GDP growth is expected to pick up over 2019. Monetary stimulus and population growth underpin household spending and business investment. Government spending on infrastructure and housing also supports domestic demand. The level of the New Zealand dollar exchange rate will support export earnings. As capacity pressures build, core consumer price inflation is expected to rise to around the mid-point of our target range at 2 percent. Downside risks to the growth outlook remain. Weak business sentiment could weigh on growth for longer. Trade tensions remain in some major economies, raising the risk that trade barriers increase and undermine global growth. Upside risks to the inflation outlook also exist. Higher fuel prices are boosting near-term headline inflation. We will look through this volatility as appropriate. Our projection assumes firms have limited pass through of higher costs into generalised consumer prices, and that longer-term inflation expectations remain anchored at our target. We will keep the OCR at an expansionary level for a considerable period to contribute to maximising sustainable employment, and maintaining low and stable inflation.

1. World demand for NZ goods

a. higher inflation and higher economic growth

b. higher inflation and lower economic growth

c. lower inflation and higher economic growth

d. lower inflation and lower economic growth

e. higher inflation but the impact on growth is uncertain

f. lower inflation but the impact on growth is uncertain

g. higher growth but the impact on inflation is uncertain

h. lower growth but the impact on inflation is uncertain

2. Population growth

a. higher inflation and higher economic growth

b. higher inflation and lower economic growth

c. lower inflation and higher economic growth

d. lower inflation and lower economic growth

e. higher inflation but the impact on growth is uncertain

f. lower inflation but the impact on growth is uncertain

g. higher growth but the impact on inflation is uncertain

lower growth but the impact on inflation is uncertain

3. Business sentiment

a. higher inflation and higher economic growth

b. higher inflation and lower economic growth

c. lower inflation and higher economic growth

d. lower inflation and lower economic growth

e. higher inflation but the impact on growth is uncertain

f. lower inflation but the impact on growth is uncertain

g. higher growth but the impact on inflation is uncertain

h. lower growth but the impact on inflation is uncertain

4. The exchange rate

a. higher inflation and higher economic growth

b. higher inflation and lower economic growth

c. lower inflation and higher economic growth

d. lower inflation and lower economic growth

e. higher inflation but the impact on growth is uncertain

f. lower inflation but the impact on growth is uncertain

g. higher growth but the impact on inflation is uncertain

h. lower growth but the impact on inflation is uncertain

5. Government spending

a. higher inflation and higher economic growth

b. higher inflation and lower economic growth

c. lower inflation and higher economic growth

d. lower inflation and lower economic growth

e. higher inflation but the impact on growth is uncertain

f. lower inflation but the impact on growth is uncertain

g. higher growth but the impact on inflation is uncertain

h. lower growth but the impact on inflation is uncertain

6. What is meant by the statement "keep the OCR at an expansionary level"?

a. Interest rates are high by historical standards

b. The RBNZ expect the impact of the OCR to be more widely felt in the economy

c. Interest rates are relatively low and provide stimulus to the economy

d. The RBNZ expect interest rates to be negative at some point

Answer 1

Answer:1

Higher inflation and lower economic growth

Answer:2

Higher infection but the impact on the growth in uncertain .

Answer:3

lower inflation but the impact on growth is uncertain

Answer:4

b. higher inflation and lower economic growth

Answer:5

a. higher inflation and higher economic growth

Answer:6

a. Interest rates are high by historical standards

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