Reserve Bank raises OCR to 7.75 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2007-04-01

Reserve Bank raises OCR to 7.75 percent
Published:
26 April 2007
The Official Cash Rate (OCR) will
increase by 25 basis points to 7.75 percent.
Recent indicators confirm that the resurgence in economic activity that began
in late 2006 has continued over recent months, with domestic demand continuing
to expand strongly. As we noted in March, demand is being fuelled by a buoyant
housing market, increases in government expenditure, a rising terms of trade,
ongoing net immigration, and a robust labour market.
The lift in domestic demand is placing further pressure on already-stretched
productive resources. Firms report that capacity is very stretched and that
they are again experiencing increased difficulty in finding both skilled and
unskilled staff. Consistent with these pressures, non-tradables inflation has
remained persistently strong and has recently shown signs of re-acceleration.
The trade-weighted exchange rate has risen further, which will exert some
downward pressure on medium-term inflation. The exchange rate is now at levels
that are both exceptional by historical standards, and unjustified on the basis
of medium-term fundamentals. Parts of the export sector continue to face
challenging conditions, but the recent sharp lift in world dairy prices is
expected to provide a boost to incomes in that sector and tourist arrivals are
continuing to grow.
There has already been a recent rise in fixed mortgage interest rates. This
further increase in the OCR is aimed at ensuring that inflation outcomes remain
consistent with achieving the target of 1 to 3 percent inflation on average over
the medium term.
For further information contact:
Mike Hannah
Communications
Ph 04 4713671, 021 497418,
mike.hannah@rbnz.govt.nz