Key rate in New Zealand remains

Inflation is the main reason that New Zealand leaves key interest rate at 8.25 per cent, growth expected to continue.

While the rest of the world braces for a possible economic slowdown, news out of New Zealand is that the central bank will keep key interest rate at 8.25 per cent.

The decision to keep the rate steady keeps the rate at this record high level. The reason for doing so is simple: inflation continues to rise here.

The central bank made note of their decision to keep the rate level was in part determined based on the country's ability to sustain its current growing economy, even though the global economic looks bleak.

In a statement released on Wednesday, Reserve Bank Governor Alan Bollard said, "The outlook for the New Zealand economy remains broadly consistent with the view outlined in the December Monetary Policy Statement. While the housing market continues to cool, the labour market remains tight, domestic income growth is still strong, especially from diary, and core inflationary pressures persist."

While the global cool down may not be affecting New Zealand just yet, eventually it will, in a large way, say many economists. Yet, this may take some time, which may allow interest rates to remain at this very high level for much of 2008.

The bank did say that they were monitoring conditions around the world, in particular the Asian markets which play a significant role in New Zealand's economy.

New Zealand is continuously battling inflation. The annual inflation moved to 3.2 per cent in the fourth quarter of 2007. The range that the central bank there tries to maintain is between 1 percent and 3 per cent. It is expected that inflation will rise to 3.5 per cent throughout 2008 prior to coming under control.