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New Zealand trims interest rates
(CNN) -- In a widely expected move, New Zealand has cut its benchmark interest rate by a quarter of a percentage point to 5.0 percent. Reserve Bank of New Zealand governor Alan Bollard, announcing the cut Thursday morning in Wellington, said the evidence pointed to a slowdown in the country's economic activity and in inflation. Government statistics released last week showed New Zealand's consumer price index (CPI) was unchanged in the June quarter, taking annual inflation down to 1.5 percent and leaving the way open for Thursday's rate cut. It is the second cut this year. The central bank trimmed the cash rate by 0.25 percentage points in April, its first change since July 2002. Analysts expect Thursday's move could be the last this year. HSBC's chief economist for Australia and New Zealand, John Edwards, said in a commentary after the RBNZ announcement that Bollard had left open a chance of further cuts, but the tone of his statement did not encourage the assumption that cuts were highly probable. "Dr Bollard will have another look in September, by which time we expect firmer New Zealand growth and more plausible signs of a moderate global upswing will lead him to conclude that a low and stable rate will be more helpful than another cut," Edwards said. Late last month, the New Zealand government said gross domestic product grew 0.6 percent in the March quarter, following increases of 0.8 percent and 0.9 percent in the December and September 2002 quarters respectively. This means that for the year ended March 2003, the economy grew by 4.3 percent. -- one of the highest rates among Asia-Pacific advanced economies. In his statement Thursday, Bollard said exports were being significantly affected by the strength of the New Zealand dollar over the past 18 months. He said while the currency had dropped slightly in recent weeks, it remained volatile and could still appreciate further in the months ahead. The N.Z. currency is trading at 58.31 U.S. cents near midday Thursday. It is up 11.3 percent against the U.S. dollar so far this year. Bollard said that if exports continued to soften "significantly", then further cuts in the official cash rate could be required. On the share market front, the New Zealand Top 50 index is 0.6 percent higher at 2163.03.
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