OCR unchanged at 2.5 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2014-01-01

OCR unchanged at 2.5 percent
The Reserve Bank today left the Official Cash Rate unchanged at 2.5 percent.
Published:
30 January 2014
issued by Reserve Bank Governor Graeme Wheeler:
The Reserve Bank today left the Official Cash Rate unchanged at 2.5
New Zealand's economic expansion has considerable momentum. Prices for
New Zealand's export commodities remain very high, especially for dairy
products. Consumer and business confidence are strong and the rapid rise in net
inward migration over the past year has added to consumption and housing demand.
Construction activity is being lifted by the Canterbury rebuild and by work in
Auckland to address the housing shortage. Continued fiscal consolidation will
partly offset the strength in demand. GDP grew by 3.5 percent in the year to
September, and growth is expected to continue around this rate over the coming
While agricultural export prices are expected to come off their peak levels,
overall export demand should benefit from improving growth in the global
economy. However, improvements in the major economies have required exceptional
monetary accommodation and there remains uncertainty about the timing of
withdrawal of this stimulus and its effects, especially on emerging market
economies.
Annual CPI inflation was 1.6 percent in 2013, and forward-looking measures of
firms' pricing intentions have been rising. Construction costs are
increasing and risk feeding through to broader costs in the economy. At the
same time, there appears to have been some moderation in the housing market in
recent months. The high exchange rate continues to dampen inflation in the
traded goods sector, but the Bank does not believe the current level of the
exchange rate is sustainable in the long run.
While headline inflation has been moderate, inflationary pressures are
expected to increase over the next two years. In this environment, there is a
need to return interest rates to more-normal levels. The Bank expects to start
this adjustment soon.
The Bank remains committed to increasing the OCR as needed to keep future
average inflation near the 2 percent target mid-point. The scale and speed of
the rise in the OCR will depend on future economic indicators.
Media Contact:
Mike Hannah, Head of Communications
04 471 3671, 021 497 418,
mike.hannah@rbnz.govt.nz