OCR unchanged at 2.5 percent

Reserve Bank

Last week the Reserve Bank left the Official Cash Rate (OCR) unchanged at 2.5 percent.

Reserve Bank Governor Alan Bollard said: “New Zealand’s economic outlook remains broadly consistent with that described in the June Monetary Policy Statement.”

“New Zealand’s trading partner outlook remains weak. Several euro-area economies are in recession and Chinese growth has slowed. The risk of significant deterioration in the euro area persists.”

“Domestically, the Bank continues to expect economic activity to grow modestly over the next few years. Housing market activity continues to increase as forecast, and repairs and reconstruction inCanterburyare expected to further boost the construction sector. Offsetting this, fiscal consolidation is constraining demand growth, and the highNew Zealanddollar continues to undermine export earnings and encourage substitution toward imported goods and services.”

“Underlying annual inflation, which recently moved below 2 percent, is expected to settle near the mid-point of the target range over the medium term.”

“It remains appropriate for the OCR to be held at 2.5 percent.”

View the Monetary Policy Statement here.

Mike Hannah, Reserve Bank of New Zealand

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