Reserve Bank raises OCR to 3.0 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2010-07-01

Reserve Bank raises OCR to 3.0 percent
Published:
29 July 2010
The Reserve Bank today increased
the Official Cash Rate (OCR) by 25 basis points to 3.0 percent.
Reserve Bank Governor Alan Bollard said: "While the outlook for
economic growth has softened somewhat, it is still appropriate to continue to
reduce the extraordinary level of support implemented during the 2008/09
recession.
"The world economy continues its fragile recovery. Trading partner
growth has turned out stronger than we predicted, however, future prospects for
growth have deteriorated. While still at high levels, our commodity prices have
moderated.
"In New Zealand, domestic demand is subdued. Households are cautious,
with retail spending growing only modestly, housing turnover in decline and
household credit growth weak. While this caution has been evident for some time,
the recent slowing in net immigration will act to further dampen consumer
spending. Business investment remains very low, with corporate lending
continuing to be subdued.
"The New Zealand dollar has appreciated in recent weeks. This
appreciation is inconsistent with the softening in New Zealand's economic
outlook and moderation in our export commodity prices.
"Overall, we continue to predict respectable near-term GDP growth, with
manufacturing confidence remaining elevated and forestry exports continuing to
expand. An eventual recovery in business investment will assist growth over the
medium term.
"Annual CPI inflation has been near 2 percent for the past five
quarters. As the economy grows, inflationary pressures are expected to pick
"Given this, some further removal of monetary policy stimulus is
appropriate at this stage. Even after today's move, the level of the OCR
is still very supportive of economic activity. The pace and extent of further
OCR increases is likely to be more moderate than was projected in the June
. Our policy assessment will be continually reviewed in light
of economic and financial market developments.
"The coming increase in the rate of GST and other government-related
price changes are likely to temporarily push annual CPI inflation above 3
percent. The Bank does not expect this price spike to have a lasting impact on
inflation. However, the price and wage setting behaviour of firms and households
will be monitored for evidence of any increase in inflation
expectations."
Media contact:
Anthea Black, External Communications Adviser
4713767, 021 2225225,
anthea.black@rbnz.govt.nz