The slowdown in China’s economy and more broadly easing global growth was a risk to the central bank’s plan to keep the cash rate on hold through 2024, Reserve Bank of New Zealand Assistant Governor Karen Silk said Friday.
Silk told Reuters in an interview there were “definitely reasons to be concerned” about the weakness in China’s economy, with consumer spending down, high debt in the property sector and because levers Beijing had used previously to keep growth going were going to be harder to pull.
“There are definitely some challenges there (in China), for sure,” Silk said. “It’s our largest trading partner ... so obviously it’s a concern for us.”
The bank currently forecasts rates will need to be on hold for longer because of lingering inflation and potentially rising house prices.
“The pressures that we're starting to see offshore around that global growth ... that's the risk that we see on the downside through the medium term,” she said.
New Zealand’s central bank on Wednesday held the cash rate at 5.5% and pushed back when it expected to start cutting rates until the first half of 2025 citing concerns about inflation. However, prior to the decision global dairy prices fell to their lowest level since 2018, below the central bank’s forecast.
Silk said the bank continued to expect prices for dairy to move higher in 2024 but that weakening demand from China for dairy as well as other commodities such as forestry and meat did pose a risk for the economy.
