OCR unchanged at 2.5 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2009-10-01

OCR unchanged at 2.5 percent
Published:
29 October 2009
The Official Cash Rate (OCR)
remains unchanged at 2.5 percent.
Reserve Bank Governor Alan Bollard said: "There are welcome signs that
economic activity is growing again.
"Activity in New Zealand's trading partners continued to rebound
during the September quarter and financial market sentiment has improved
further. However, there remain significant vulnerabilities and challenges to be
worked through in many economies. This process could weigh on global growth
going forward.
"In New Zealand, the housing market has reversed some of the decline in
prices experienced over the past couple of years and a very gradual increase in
household spending appears to be taking place. Government spending is also
supporting activity. Business spending, however, remains weak and credit growth
is very subdued.
"The high level of the New Zealand dollar has limited the scope for
exports to contribute to the recovery, and reinforces a bias towards domestic
expenditure. After some short-term correction it is also likely to see the
current account deficit begin to widen in the medium term.
"The current composition of growth continues to raise questions about
its sustainability. These concerns would intensify if credit growth began to
propel stronger domestic demand.
"Annual CPI inflation is expected to continue to track comfortably
within the target range over the medium term.
"The forecast recovery in economic activity is based on fiscal and
monetary policy continuing to provide substantial support to the economy. We
think such support remains appropriate. Further ahead, removing some of the
current fiscal stimulus is likely to reduce the work that monetary policy will
otherwise need to do.
"In contrast to current market pricing, we see no urgency to begin
withdrawing monetary policy stimulus, and we expect to keep the OCR at the
current level until the second half of 2010."
Media contact:
Mike Hannah
Head of Communications
Ph 04 4713671,
021 497418,
mike.hannah@rbnz.govt.nz