NZ central bank to retain rates, dovish view on virus-driven turbulence

New Zealand’s central bank is expected to keep rates unmoved at its policy meeting on Wednesday. However, it projects a cautious tone as fears of a second wave of COVID-19 infections dampened outlook and increased economic uncertainty.

All economists surveyed by Reuters expected the Reserve Bank of New Zealand to maintain the official cash rate at 0.25% for the rest of the year. Some of them anticipate rates plunging to zero and reaching negative territory in 2021.

In May, the central bank pledged to hold rates at 0.25% until early 2021, working with commercial banks to brace for negative rates in the future. In addition to this, the country is currently suffering from its sharpest downturn after its GDP plunged 1.6% in the March quarter. Expectations were dim as it is likely to drop further in the next three months.