New Zealand Reserve Bank governor Graeme Wheeler says he is likely to cut interest rates again, but is wary of the risk of inflaming the housing market and wants some wiggle room in the event of a global downturn.
He says the global economy was experiencing a difficult period with growth slowing in the developing world, unprecedented monetary accommodation, and prospects of tighter monetary conditions in the US, and further easings in the euro-area and Japan.
He told the Institute of Finance Professional NZ annual conference in Auckland that the central bank needed to have "sufficient capacity to cut interest rates if the global economy slows significantly".
"Some further easing in the OCR seems likely, but this will continue to depend on the emerging flow of economic data."
That echoes his wording in the monetary policy statement last month when he cut the official cash rate a quarter point to 2.75 per cent and indicated he had a further cut of that magnitude up his sleeve.
He next reviews interest rates on October 29, before the next full MPS on December 10.
"We remain conscious of the impact that low interest rates can have on housing demand and its potential to feed into higher price inflation," he said.
House prices in Auckland have surged at a 26 per cent annual rate and the price-to-income ratio for the city is twice that of the rest of the country.
Government figures due on Friday are expected to show inflation was just 0.2 per cent in the third quarter, matching the expected annual rate, which is well below the central bank's 1 per cent-to-3 per cent range.
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