If growth outlook worsens interest rates could be cut further: Reserve Bank of New Zealand

  • New Zealand's central bank has signaled that interest rates could remain steady at its current record low until 2020, but the bank is willing to cut rates further if needed, Deputy Governor of the Reserve Bank of New Zealand Geoff Bascand told CNBC.
  • "Right now, it's best to sit and wait and watch — see how the data unfolds with risks on either side," Bascand said on Tuesday.

Interest rates in New Zealand are at an all-time low and the central bank has signaled it could remain at its current level until 2020 — but the bank is willing to cut rates further if needed, the deputy governor of the Reserve Bank of New Zealand Geoff Bascand told CNBC on Tuesday.

"(If) growth remains very soft, business confidence is very low — if that translates into weaker demand, weaker investment, then it is possible we would need to reduce the rate to provide a bit more stimulus," Bascand, who was at the UBS Australasia conference, told CNBC's Matt Taylor.

At the same time, he added, "we've also seen firms really saying that they are struggling to get hold of the labor that they need. The capacity constraints have been there."

"In the face of that, we're seeing a little bit of cost and price pressure on the horizon and so that also provides some upside risk to our rate track," Bascand said, suggesting that wage inflation could prompt the RBNZ to consider raising interest rates.

The central bank maintained its official cash rate (OCR) at a record low of 1.75 percent for the 14th straight review on Thursday, and has previously indicated it could stay at this level through to 2020.

Bascand said cutting or hiking rates are both options that come with their own risks and noted that the central bank intends to maintain its interest rates while it watches the health of the economy closely.

"Right now, it's best to sit and wait and watch — see how the data unfolds with risks on either side," Bascand said.

— Reuters contributed to the article