Reserve Bank of New Zealand Cuts OCR

There was a sigh of relief to see the Reserve Bank of New Zealand (RBNZ) cut the official cash rate by 50 basis points to 2.5% per cent as it reviewed economic data at its March board meeting.

Many economists are now predicting only one further rate rise in the end of the last quarter of the year.

The RBNZ estimated rebuilding costs in Christchurch of NZ$15 billion and forecast a 0.6% fall in GDP in the first quarter of this year because of the earthquake.

What we would really like to see is the RBNZ stay its hand for the remainder of 2011 to allow consumer confidence to return and to take undue pressure off household budgets.

Mortgage holders, particularly those having to contend with repairing flood affected homes just want an extended period of stability.

The RBNZ could do a lot more to restore consumer confidence by remaining on the sidelines for the rest of the year.

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