Academic journal article The Reserve Bank of New Zealand Bulletin

OCR Unchanged at 7.25 per Cent: 8 June 2006

Academic journal article The Reserve Bank of New Zealand Bulletin

OCR Unchanged at 7.25 per Cent: 8 June 2006

Article excerpt

The Official Cash Rate (OCR) will remain at 7.25 per cent.

Reserve Bank Governor Alan Bollard said: "Recent economic activity has been weaker than projected in the March Monetary Policy Statement. However, the short-term inflation outlook has worsened.

"Growth is expected to remain low through 2006, before recovering in 2007. The much awaited economic rebalancing from domestic spending to exports commenced in late 2005, and is expected to continue over the next two years. Export growth will recover as a result of the lower exchange rate and buoyant demand in world markets. At the same time, household spending will be constrained by a continued weakening in the housing market, high petrol prices and a slowdown in employment growth.

"While weaker economic activity will reduce medium-term inflation pressures, the short-term inflation outlook has deteriorated. The sharp decline in the exchange rate over March and April will lead to higher prices on imported goods, although weak domestic demand and foreign exchange hedging by importers may dampen this increase. …

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