NZ central bank should keep OCR unchanged, NZIER 'shadow board' says

Tuesday 24th April 2012

The Reserve Bank of New Zealand should keep the official cash rate unchanged at a record low 2.5 percent, according to the a panel of economists, business leaders and academics.

The NZIER Shadow Board said there’s no need for Governor Alan Bollard to act to raise rates any time soon because inflation is low, the high New Zealand dollar is restraining the cost of imports, commodity prices are falling and activity is “tracking sideways.”

The board, which is to be convened as a trial throughout 2012 with the aim of encouraging debate around central bank policy, gave a 68 percent weighting to the OCR being appropriate at 2.5 percent.

Raising rates now was given a 7 percent chance of being a good move while a rate cut garnered a combined 26 percent approval.

While some board members said the central bank should cut rates, the spread of responses is similar to the March 6 assessment – which was two days before the monetary policy statement was released, keeping the OCR on hold.

The shadow board’s view concurs with the consensus of a Reuters survey, which is unanimous that Bollard will keep rates unchanged this week.

Bollard is due to release his review of interest rates on Thursday at 9am.

Inflation printed lower than the central bank forecast in the first quarter at 0.5 percent versus the bank's pick of 0.7 percent. Tradable sector inflation shrank 0.4 percent, the second quarterly decline. The central bank tries to keep annual inflation between 1 percent and 3 percent.

(BusinessDesk)

BusinessDesk.co.nz

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