OCR reduced to 3.5 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2009-01-01

OCR reduced to 3.5 percent
Published:
29 January 2009
The Reserve Bank today reduced the
Official Cash Rate (OCR) from 5.0 percent to 3.5 percent.
Reserve Bank Governor Alan Bollard commented that "the news coming from
our trading partners is very negative. The global economy is now in recession
and the outlook for international growth has been marked down considerably since
our December
Monetary Policy Statement
"Globally, there has been considerable policy stimulus put in place and
we expect this to help bring about a recovery in growth over time. However,
there remains huge uncertainty about the timing and strength of a recovery.
"The extent of the decline in global growth prospects and the ongoing
uncertainty has played a large part in today's decision. We now expect
the impact on New Zealand of these developments to be greater than we did in
December, as a result of a more negative outlook for the terms of trade and
exports, and tighter credit conditions.
"Inflation pressures are abating. We have confidence that annual
inflation will be comfortably inside the target band of 1 to 3 percent over the
medium term.
"Given this backdrop it is appropriate to take the OCR to a more
stimulatory position and to deliver this reduction quickly.
"Today's decision brings the cumulative reduction in the OCR
since July 2008 to 4.75 percentage points. Lower interest rates will have a
positive impact on growth, alongside a lower exchange rate and fiscal stimulus,
provided firms and households do not unnecessarily contract their spending.
"To ensure the response we are seeking, we expect financial
institutions to play their part in the economic adjustment process by passing on
lower wholesale interest rates to their customers. This will help New Zealand
respond flexibly.
"Further movements in the OCR will be assessed against emerging
developments in the global and domestic economies and the response to policy
changes already in place. We would expect any further reductions to be smaller
than those seen recently."
Media contact:
Mike Hannah
Head of Communications
Ph 04 4713671,
021 497418,
mike.hannah@rbnz.govt.nz