Interest rate treads water

By Phil Boeyen, ShareChat Business News Editor

Wednesday 4th July 2001

The Reserve Bank says the world economy is weak but, as predicted, has left the Official Cash Rate unchanged at 5.75%.

Reserve Bank Governor, Don Brash, says inflation pressures since the OCR was reduced to 5.75 per cent in May are largely the same.

"The short-term outlook for most of our trading partners is deteriorating, although there are better signs in Australia.

"However, offsetting these factors, most export prices remain high, partly because of the low exchange rate.

Mr Brash says investment in New Zealand has been relatively weak, but consumer spending has remained relatively robust.

"Many inflation measures are still higher than is consistent with our target, but most of the recent signs suggest inflation will fall back into the target range over the next year or so."

"The fact that export volumes have not responded strongly to the low dollar and high world prices may mean that the global slowdown is having more impact that previously thought."

However Mr Brash says whether such downside risks warrant a further cut in the OCR will be re-examined next month.

Leaving the rate unchanged will come as little surprise to the market, which had not been expecting any movement in the wake of recent positive trade figures and relatively upbeat consumer and business confidence reports.

Comments from our readers

No comments yet