Academic journal article The Reserve Bank of New Zealand Bulletin

OCR Unchanged at 6.75 per Cent: 15 September 2005

Academic journal article The Reserve Bank of New Zealand Bulletin

OCR Unchanged at 6.75 per Cent: 15 September 2005

Article excerpt

The Reserve Bank has left the Official Cash Rate (OCR) at 6.75 per cent.

Reserve Bank Governor Alan Bollard said: "Since our June Monetary Policy Statement, economic indicators have broadly confirmed the slowdown in activity that commenced in the second half of 2004. The slowdown has been concentrated in sectors such as manufacturing and tourism that have been exposed to the high exchange rate. The non-traded sectors of the economy on the other hand, such as household and business services and construction, have maintained their high growth of recent years. The housing market in particular has remained strong, underpinning consumption growth. Reflecting the slow pullback in domestic demand, capacity and labour shortages are expected to persist well into 2006.

"New developments in oil prices have made the future more uncertain. Oil prices have surged in recent months and are now 20 per cent higher than projected in June, some 60 per cent up from the end of 2004. As a consequence, headline CPI inflation is now forecast to approach 4 per cent over the next few quarters before returning below 3 per cent by early 2007. Monetary policy will not attempt to offset the unavoidable first-round price effects of the oil price spike. …

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