OCR unchanged at 8.25 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2008-04-01

OCR unchanged at 8.25 percent
Published:
24 April 2008
The Official Cash Rate (OCR) will
remain unchanged at 8.25 percent.
Reserve Bank Governor Alan Bollard said: "Economic activity has
weakened more markedly than expected in the Bank's March
Policy Statement
. There have been sharp falls in consumer and business
sentiment, exacerbated by tighter credit conditions, a further decline in the
housing market and weaker prospects for world growth. Financial market
turbulence around the world continues to add to an uncertain economic
environment. Further, the very dry summer is also weakening short-term growth
prospects.
However, the labour market is still strong and New Zealand's key
international commodity prices remain high. Government spending plans and the
possibility of personal tax cuts can also be expected to limit the economic
The weaker economy will, over time, ease accumulated pressure on resources
and reduce inflation pressure. However, short term inflation is likely to
remain persistently high, due in large part to repeated increases in food and
energy prices. There is a risk that wage settlements respond to these short
term price shocks rather than adjusting to the changing economic conditions,
thus perpetuating inflation pressures.
We see significant downside risk to future activity but upside risks to
inflation. A further risk to the outlook is the persistently strong New Zealand
dollar which, while helping moderate headline CPI inflation, remains a drag on
export growth.
Given this outlook, we expect that the OCR will need to remain at current
levels for a time yet to ensure inflation outcomes of 1 to 3 percent on average
over the medium term.
Media contact:
Mike Hannah
Head of Communications
04 4713671, 021 497418,
mike.hannah@rbnz.govt.nz