OCR reduced to 6.5 percent - Te Pūtea Matua
Central bank: rbnz | Type: statement | Date: 2008-10-01

OCR reduced to 6.5 percent
Published:
23 October 2008
The Reserve Bank today reduced the
Official Cash Rate (OCR) from 7.5 percent to 6.5 percent.
Reserve Bank Governor Alan Bollard commented that "ongoing financial
market turmoil and a deteriorating outlook for global growth have played a large
role in shaping today's decision.
"Economic activity in New Zealand will be further constrained, relative
to the outlook presented in our September
Monetary Policy Statement
these international developments. New Zealand can expect to face lower demand
for exports and credit is likely to be less readily available. In this
environment consumers and businesses are likely to be more cautious and curtail
"The reduction in domestic spending will be partly offset by the
depreciation of the New Zealand dollar over the past few months, falling oil
prices and the recent loosening of fiscal policy.
"With weaker short-term growth and sharply lower oil prices we now
expect that annual CPI inflation will return to the target band of 1 to 3
percent around the middle of 2009. However, we still have concerns that
domestically generated inflation (particularly in labour costs, local body
rates, electricity prices and construction costs) is remaining stubbornly
"Consistent with the Policy Targets Agreement, the Bank's focus
will remain on medium-term inflation. Should the outlook for inflation evolve as
projected we would expect to lower the OCR further. However, the timing and
extent of OCR reductions over the coming months will depend on evidence of
actual reductions in domestic cost pressures as well as how the global financial
developments play out."
Media contact:
Anthea Black
Ph: 04 4713767, 021 2225225
anthea.black@rbnz.govt.nz