Academic journal article The Reserve Bank of New Zealand Bulletin

RBNZ Reduces OCR to 5.25 per Cent: 5 June 2003. (for the Record: Recent Press Releases)

Academic journal article The Reserve Bank of New Zealand Bulletin

RBNZ Reduces OCR to 5.25 per Cent: 5 June 2003. (for the Record: Recent Press Releases)

Article excerpt

The Reserve Bank has decided to cut the Official Cash Rate by 25 basis points to 5.25 per cent.

Speaking at the release of the Reserve Bank's June 2003 Monetary Policy Statement, Reserve Bank Governor Alan Bollard said "Reducing the OCR is an appropriate response to a softening in inflation pressures and provides some protection for the economy against downside influences.

"The evidence has become clearer that growth is beginning to slow following a period of strength. This slowdown mainly reflects the rapid appreciation of the exchange rate over the past 18 months, leaving the export sector more exposed to the soft world economy. We are projecting further slowing but expect domestic activity to remain reasonably robust with rapid growth in the population supporting demand. However, businesses are less assured about future trading prospects and confidence measures have fallen away. With confidence fragile, the impact of events such as SARS and dry weather on activity could be amplified.

"The reformulated Policy Targets Agreement requires us to target inflation with a medium term focus and to avoid unnecessary instability in output, the exchange rate and interest rates. …

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