Academic journal article The Reserve Bank of New Zealand Bulletin

OCR Unchanged at 8.25 Percent

Academic journal article The Reserve Bank of New Zealand Bulletin

OCR Unchanged at 8.25 Percent

Article excerpt

13 September 2007

The Official Cash Rate (OCR) will remain unchanged at 8.25 percent.

Reserve Bank Governor Alan Bollard said: "The outlook for economic activity and inflation has become more uncertain since we reviewed the OCR in July. Credit concerns and heightened risk aversion have led to significant turbulence in global financial markets. This development increases the likelihood of a weaker economic outlook for the United States and New Zealand's other key trading partners than in recent forecasts.

"The consequences of this financial market turmoil for New Zealand remain unclear at this stage. However, we continue to expect a significant boost to the economy over the next two years from the sharp rise in world prices for dairy products and some other commodities that has occurred over the past year. A sharp decline in the New Zealand dollar since July, if sustained, will act to reinforce the effects of higher world prices on export sector revenues.

"Recent inflation outcomes have highlighted widespread inflation pressures but indicators in recent weeks suggest that previous increases in the OCR are starting to dampen domestic spending, which will help to reduce those pressures. …

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