OCR unchanged at 2.5 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2013-10-01

OCR unchanged at 2.5 percent
The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.
Published:
31 October 2013
The Reserve Bank today left the
Official Cash Rate (OCR) unchanged at 2.5 percent.
Reserve Bank Governor Graeme Wheeler said: "The recovery in the United
States and other major advanced economies remains patchy. Nevertheless, world
prices for New Zealand's export commodities are very high.
"Global long-term interest rates are still very low, but have been
volatile recently. This volatility has largely been due to uncertainty as to
when the Federal Reserve will exit from quantitative easing.
"The New Zealand economy is estimated to have grown by more than 3
percent in the year to September. Household spending is rising, and
reconstruction in Canterbury is being reinforced by a broader rise in
construction in Auckland and across the country more generally. This will
support economic activity and start to ease the housing shortage.
"In the meantime high house price inflation persists, especially in
Auckland. As has been noted for some time, the Reserve Bank does not want
continued high house price inflation to compromise financial or price stability.
Recently introduced restrictions on high loan-to-value mortgage lending are
expected to help slow house price inflation and the Bank will continue to
monitor the situation closely.
"The exchange rate remains high and is a headwind to the traded goods
sector. Sustained strength in the exchange rate that leads to lower
inflationary pressure would provide the Bank with greater flexibility as to the
timing and magnitude of future increases in the OCR. Fiscal consolidation is
also expected to continue weighing on demand over the next few years.
"Annual CPI inflation increased to 1.4 percent in the September
quarter. As domestic demand pressure picks up, headline inflation is likely to
rise towards the 2 percent target midpoint. The Bank is aiming to keep
inflation and inflation expectations close to 2 percent over the medium term.
"Although we expect to keep the OCR unchanged in 2013, OCR increases
will likely be required next year. The extent and timing of the rise in the
policy rate will depend largely on the degree to which the momentum in the
housing market and construction sector spills over into broader demand and
inflation pressures."
Media Contact:
Mike Hannah, Head of Communications
04 471 3671, 021 497 418,
mike.hannah@rbnz.govt.nz