OCR unchanged at 7.25 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2007-01-01

OCR unchanged at 7.25 percent
Published:
25 January 2007
The Official Cash Rate (OCR) will
remain unchanged at 7.25 percent.
Reserve Bank Governor Alan Bollard said: "While indicators show that
economic growth was continuing to moderate in the third quarter of 2006, it is
increasingly apparent that domestic demand has rebounded since then, with retail
trade picking up, a resurgent housing market and consumer and business
confidence recovering strongly. The main drivers appear to be the decline in
petrol prices since last October, a pickup in net immigration and an
expansionary fiscal policy.
"At the same time, headline inflation has reduced as a result of the
lower oil prices and the strengthening of the exchange rate in the fourth
quarter. Annual CPI inflation fell to 2.6 percent in December and is projected
to decrease considerably further through 2007, thus helping to lower inflation
expectations. But the medium-term outlook is less rosy, with annual rates of
inflation projected to return to the upper part of our target range through 2008
and into 2009.
"While the near-term inflation outlook is relatively benign, we remain
concerned about the upside risks to medium-term inflation. In particular, our
assumption that the housing market and consumer demand will resume their slowing
trend over 2007 and 2008 is looking more uncertain, particularly if further
fiscal expansion occurs.
"In the absence of clear indications of a moderation in housing and
domestic demand, it is likely that further policy tightening will be required.
The situation will be reassessed in the light of a full review of our economic
forecasts at the March
Monetary Policy Statement
. A return to a
moderating trend in housing and domestic demand will be essential if we are to
see a reduction in medium-term inflation pressures."
For further information contact:
Mike Hannah
of Communications
Ph 04 4713671, 021 497418,
mike.hannah@rbnz.govt.nz