RBNZ raises OCR to 3.5 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2014-07-01

RBNZ raises OCR to 3.5 percent
The Reserve Bank today increased the Official Cash Rate (OCR) by 25 basis points to 3.5 percent.
Published:
24 July 2014
Statement issued by Reserve Bank Governor Graeme
The Reserve Bank today increased the Official Cash Rate (OCR) by 25 basis
points to 3.5 percent.
New Zealand's economy is expected to grow at an annual pace of 3.7
percent over 2014. Global financial conditions remain very accommodative and are
reflected in low interest rates, narrow risk spreads, and low financial market
volatility. Economic growth among New Zealand's trading partners has
eased slightly in the first half of 2014, but this appears to be due to
temporary factors.
Construction, particularly in Canterbury, is growing strongly. At the same
time, strong net immigration is adding to housing and household demand, although
house price inflation has moderated further since the June
Over recent months, export prices for dairy and timber have fallen, and these
will reduce primary sector incomes over the coming year. With the exchange rate
yet to adjust to weakening commodity prices, the level of the New Zealand dollar
is unjustified and unsustainable and there is potential for a significant
Inflation remains moderate, but strong growth in output has been absorbing
spare capacity. This is expected to add to non-tradables inflation. Wage
inflation is subdued, reflecting recent low inflation outcomes, increased labour
force participation, and strong net immigration.
It is important that inflation expectations remain contained. Today's
move will help keep future average inflation near the 2 percent target mid-point
and ensure that the economic expansion can be sustained. Encouragingly, the
economy appears to be adjusting to the monetary policy tightening that has taken
place since the start of the year. It is prudent that there now be a period of
assessment before interest rates adjust further towards a more-neutral
The speed and extent to which the OCR will need to rise will depend on the
assessment of the impact of the tightening in monetary policy to date, and the
implications of future economic and financial data for inflationary
pressures.
Media Contact:
Mike Hannah, Head of Communications
Ph 04 471 3671, 021 497 418,
mike.hannah@rbnz.govt.nz