NZealand central bank leaves interest rates unchanged

WELLINGTON, Jan 23, 2008 (AFP) – New Zealand’s central bank left interest rates unchanged Thursday, saying the economy was in good shape despite recent global market turmoil and fears of a recession in the US. Reserve Bank of New Zealand (RBNZ) Governor Alan Bollard left the official cash rate on hold at 8.25 percent, one of the highest official rates in the developed world.

Bollard’s move was expected, despite the decision of the US Federal Reserve to slash its key rate by 0.75 percentage points on Tuesday and growing fears of a US recession, which has created chaos on global share markets.

“We will be watching these developments closely, particularly their implications for the Asian and Australian economies and for world commodity prices,” Bollard said.

He said the outlook for the New Zealand economy and interest rates was broadly unchanged since the last review in early December, although uncertainty has increased because of market turmoil and the US slowdown.

The housing market, which had been a key driver of growth in recent years, was cooling, but the labour market was tight and domestic income growth was still strong, Bollard said.

Inflationary pressures were being fed by growin