New Zealand’s Business NZ Performance of Services Index dropped to 43.0 in May from the previous reading of 47.1, according to Business NZ on Monday. The figure registered the lowest level for a non-COVID lockdown month since the survey began in 2007. “The speed of decline is as worrisome as its size over the past three months. There is weak and then there is very weak. Overall, this tells of a services sector in reverse at pace,” said BNZ’s Senior Economist Doug Steel.
To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD.
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