Academic journal article The Reserve Bank of New Zealand Bulletin

Reserve Bank Raises OCR to 8.00 Percent

Academic journal article The Reserve Bank of New Zealand Bulletin

Reserve Bank Raises OCR to 8.00 Percent

Article excerpt

7 June 2007

The Official Cash Rate (OCR) will increase by 25 basis points to 8.00 percent.

Reserve Bank Governor Alan Bollard said: "Domestic demand has grown strongly since late 2006, particularly in the household sector. Housing market activity has been buoyant, consumer confidence has remained relatively robust and a range of business sector indicators, including employment and investment intentions, have been strong. As we have noted recently, government spending continues to increase, which is contributing to domestic demand.

"Following several years of strong growth, firms have indicated that capacity remains stretched and that finding both skilled and unskilled staff has become increasingly difficult. These pressures continue to underpin inflation.

"A sustained period of slower growth in domestic activity will be required to alleviate inflation pressures. Lending rates have risen significantly in recent months, partly due to previous increases in the OCR. Given the usual lags, we have not yet seen the effect of these increases on domestic demand and inflation pressures. There are some early indications from recent opinion surveys and other data that growth may be starting to soften, but these are by no means conclusive. …

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