OCR unchanged at 2.5 pc

The Reserve Bank (RBNZ) has shown itself committed to its recent statements, by leaving the official cash rate (OCR) unchanged at 2.5 per cent this week.

Statements from the RBNZ over the past few months have consistently forecast that policy stimulus will be removed starting from around mid-2010.

This means borrowers can expect interest rates to start rising slowing from this point in time, towards more normal levels.

In its official statement following the March board meeting, the RBNZ declared that inflation was tracking as expected, although there will be some inflation pressure in the short term due to the implementation of the Emissions Trading Scheme and increases in ACC charges.

The RBNZ said that consumer confidence and household spending has increased over the past few months, but there is still caution from households.

And although the RBNZ expects to increase the OCR this year, it is possible that any increases may be limited and infrequent, as current bank costs reduce the need for policy intervention.