Reserve Bank leaves interest rates unchanged

By NZPA

Thursday 6th March 2003

Reserve Bank governor Alan Bollard, dubbed "Dr No Change", has done it again -- left interest rates unchanged.

Following the bank's quarterly monetary policy and economic review, the Official Cash Rate (OCR) has been left at 5.75 percent -- the fourth time in as many reviews Dr Bollard has left the OCR unchanged.

Interest rates are well above those of New Zealand's trading partners and despite the fact the bank is predicting economic growth to nearly halve -- from 4.25 percent in the March 2003 year to 2.5 percent in 2004.

The bank is forecasting growth to fall even further, to 2.25 percent, for the next two years, well below the 3.25 percent rate the bank is predicting for the world economy.

Export prices, expected to be off 14.25 percent this year, will fall another 2.75 percent in 2005 before staging a recovery.

UBS Warburg chief economist Robin Clements told Reuters: "The headlines don't strike me as being overly dovish, which I think that's what the market was looking for -- not only confirmation of easing bias but more, that it was imminent, a couple of conditions that would imply that a rate cut could be soon.

"It looks to me as if you've still got that easing bias but just as it was in January with lots of conditions, ifs and buts."

He expected a rate cut no earlier than September.

ASB Bank chief economist Anthony Byett told Reuters the decision was no surprise.

"(Dr Bollard)'s still signalling the possibility of a rate cut later in the year, so it's pretty much as the market expected.

"We will know in April whether it (a cut) will happen or not, and a lot of it will turn on the global situation.

"I don't imagine it will move the market considerably but it just reinforces what's there now."

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