The New Zealand dollar jumped against the US dollar after the country’s central bank announced an interest-rate cut to a record low on Wednesday.
In a statement, Reserve Bank of New Zealand cut its Official Cash Rate (OCR) by 25 basis points to 1.75%, as economists had expected, saying it expects inflation to rise in 2017.
“Our current projections and assumptions indicate that policy settings, including today’s easing, will see growth strong enough to have inflation settle near the middle of the target range,” the bank said.
The currency pair gained 0.41% to 0.7356 at 3:05 p.m. ET.
“Annual CPI inflation was weak in the September quarter, in part due to lower fuel prices and cuts in ACC levies,”the bank said. “Annual inflation is expected to rise from the December quarter, reflecting the policy stimulus to date, the strength of the domestic economy, and reduced drag from tradables inflation.”