McDermott reveals drop in New Zealand’s neutral rate of interest
New Zealand's "neutral interest rate" declined in the wake of the global financial crisis, according to John McDermott, the Reserve Bank of New Zealand (RBNZ) assistant governor.
The neutral interest rate, McDermott explained, is the level of interest rates that prevail when the economy is growing at a rate that neither under- nor over-utilises its resources, and inflation remains close to 2%.
The RBNZ uses the nominal 90-day interest rate as a representative of the overall economy and
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