OCR reduced to 2.5 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2009-04-01

OCR reduced to 2.5 percent
Published:
30 April 2009
The Reserve Bank today reduced the
Official Cash Rate (OCR) by 50 basis points to 2.5 percent.
Reserve Bank Governor Alan Bollard said: "Overall, developments since
March point to lower medium-term inflation than previously projected. The main
factors behind this are weaker global growth, and an unwarranted tightening in
financial conditions via both higher long-term interest rates and a stronger
exchange rate than expected.
"Global financial markets have showed some tentative signs of
stabilisation since the March
Monetary Policy Statement
and governments
in the major economies are continuing to make progress in resolving their
banking system difficulties. However, a large amount still needs to be done and
sentiment remains fragile. Negative feedback from the global recession could
also still adversely affect financial institutions.
"The world economy deteriorated further than expected in the first
quarter of 2009. While monetary and fiscal policy responses in many countries
have been substantial and there are some signs of stabilisation in some
countries, we still expect the adverse economic forces generated by the crisis
to remain dominant throughout 2009. The timing and extent of global recovery
remain highly uncertain.
"While the New Zealand economy has not experienced the same extreme
falls in economic activity as seen in a number of our trading partners, it
remains weak. Business sentiment is low, investment has been curtailed and
employment reduced.
"We expect the large decline in the OCR over the past year to pass
through to more borrowers over coming quarters as existing fixed-rate mortgages
come up for re-pricing. This, together with the stimulus from fiscal policy,
will act to support the New Zealand economy and eventually see activity trough
and pick up thereafter. However, the scale of the global financial crisis and
domestic adjustments underway are such that it is likely to be some time before
economic activity returns to robust and healthy levels.
"We consider it appropriate to provide further policy stimulus to the
economy. We expect to keep the OCR at or below the current level through until
the latter part of 2010. The OCR could still move modestly lower over the
coming quarters."
Media contact:
Mike Hannah
Head of Communications
Ph 04 4713671, 021
mike.hannah@rbnz.govt.nz