INDEPENDENT NEWS

Reserve Bank raises OCR to 2.75 percent

Published: Thu 10 Jun 2010 10:17 AM
Reserve Bank raises OCR to 2.75 percent
The Reserve Bank today increased the Official Cash Rate (OCR) by 25 basis points to 2.75 percent.
Reserve Bank Governor Alan Bollard said: "The economy has entered its second year of recovery with growth becoming more broad-based.
"The recovery in trading partner activity is continuing, with growth in Asia particularly strong. Along with ongoing growth in Australia and recovery in the United States, this has so far offset weak growth in some other export markets. Against this backdrop, New Zealand's export commodity prices have increased sharply over the past few months, boosting export incomes.
"In contrast to signs of global economic recovery there has been renewed turmoil in financial markets. Currently, we expect the main impact on New Zealand to come through continuing upward pressure on the cost of funds to the banking system.
"In New Zealand, growth of around 3½ percent is expected this year and next. The main drivers of this outlook are higher export prices and volume growth, an improving labour market and a pick-up in residential and business investment. However, we expect households to remain relatively cautious, with the housing market and credit growth staying subdued. This moderate household spending contributes to some rebalancing in the economy.
"Underlying CPI inflation is expected to track within the target range even as the economy expands further. That said, headline CPI inflation will be boosted temporarily by the announced increase in GST and other government-related price changes. Provided households and firms do not reflect this price spike in their wage and price-setting behaviours we do not expect a lasting impact on inflation.
"Given this outlook and as previously signalled, we have decided to begin removing some of the monetary policy stimulus that is currently in place. The further removal of stimulus will be reviewed in light of economic and financial market developments.
"The fact that bank funding costs are higher, long-term interest rates are higher than short-term interest rates, and a greater proportion of borrowers use floating rate mortgages should all reduce the extent to which the OCR will need to be increased relative to previous cycles."
ENDS

Next in Business, Science, and Tech

New Year Border Exception For Seasonal Workers In The Horticulture And Wine Industries
By: New Zealand Government
Grey Power Is Disappointed To Learn Of More Bank Closures
By: Grey Power New Zealand
Supply Chain On Brink Of Overload Says National Road Carriers
By: National Road Carriers
Annual Goods Trade Surplus At 28-year High
By: Statistics New Zealand
How Real Is That Bargain?
By: Commerce Commission
Births And Deaths: Year Ended September 2020
By: Statistics New Zealand
Okay Boomer: Kākāpō Wins Bird Of The Year 2020
By: Forest And Bird
Govt Goes “hard And Early” On RSE Workers
By: ACT New Zealand
Bringing RSE Workers Back The Right Move
By: Business NZ
Cream Of The Crop Will Get To Market
By: Auckland Business Chamber
Horticulture Industry Appreciates Government’s Decision On RSE Workers
By: Horticulture NZ
BNZ Optimistic About Year Ahead
By: BNZ
Māori Population Estimates: At 30 June 2020
By: Statistics New Zealand
View as: DESKTOP | MOBILE © Scoop Media