Academic journal article The Reserve Bank of New Zealand Bulletin

OCR Reduced to 3 Percent

Academic journal article The Reserve Bank of New Zealand Bulletin

OCR Reduced to 3 Percent

Article excerpt

12 March 2009

The Reserve Bank today reduced the Official Cash Rate (OCR) by 50 basis points to 3 percent.

Reserve Bank Governor Alan Bollard said: "The world economy deteriorated very rapidly late last year, amid ongoing losses and extreme volatility in international financial markets. While monetary and fiscal policy responses in many countries have been substantial we still expect the adverse economic forces generated by the crisis to remain dominant throughout 2009. The timing and extent of global recovery remain highly uncertain.

"In New Zealand, the impact of difficult trading conditions is showing through clearly in reduced export revenues, weak business sentiment, and sharply curtailed investment and employment. Further house price falls and increased precautionary saving by households are driving a weakness in spending. Inflation pressure is abating rapidly as a result.

"The OCR has now been reduced 525 basis points in little more than six months, taking interest rates to very stimulatory levels. Further falls in the lending rates faced by households and businesses are in the pipeline. While credit growth is easing in line with the weak economy, we expect financial institutions to continue lending on sound business propositions, to support the recovery. …

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