Reserve Bank matches overseas cuts

By Phil Boeyen, ShareChat Business News Editor

Wednesday 19th September 2001

Interest rates have been cut by 50 points to 5.25% in response to last week's US terrorist attacks.

The official cash rate had been due for review on October 3 and even before last week's tragedy some market commentators had raised the likelihood of a rate cut.

Reserve Bank Governor Don Brash says the unscheduled interest rate has been made primarily because of the recent tragic events in the US.

"It seems more likely now that the current slowdown in the world economy will worsen. In these circumstances, New Zealand's short-term economic outlook would be adversely affected, although any downturn might well be relatively short-lived.

"New Zealand business and consumer confidence will be hurt by recent international and domestic developments, and today's move is a precaution in a period of heightened uncertainty."

Mr Brash says although the bank's focus remains on keeping core inflation in check, it believes interest rates don't need to be as high as previously to achieve this.

The Reserve Bank move is in line with cuts this week by in the US and Europe. Australia is yet to move on interest rates although it only just made a cut earlier this month, dropping the official rate by 25 points to 4.75%.

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