RBNZ OCR Release 29th July 2010:
It came as no surprise that the Reserve Bank of New Zealand (RBNZ) announced on 29th July that it had raised the Official Cash Rate (OCR) by 25 basis points from 2.75 percent to 3.0 percent.
This was in light of the statement made by Reserve Bank Governor Alan Bollard during his previous OCR announcement on 10th June 2010
given this outlook and as previously signalled, we have decided to begin removing some of the monetary policy stimulus that is currently in place.
With the OCR now at 3 percent, it was the second consecutive rise since the easing of the monetary policy set in place during the 2008/09 recession by the RBNZ; however, even with the OCR increase reflecting the economy entering into its second year of growth there is still some unease in the previously predicted levels of growth in the New Zealand economy with Alan Bollard stating:
While the outlook for economic growth has softened somewhat, it is still appropriate to continue to reduce the extraordinary level of support implemented during the 2008/09 recession. Followed with,
The world economy continues its fragile recovery. Trading partner growth has turned out stronger than we predicted, however, future prospects for growth have deteriorated. While still at high levels, our commodity prices have moderated. Followed by,
In New Zealand, domestic demand is subdued. Households are cautious, with retail spending growing only modestly, housing turnover in decline and household credit growth weak. While this caution has been evident for some time, the recent slowing in net immigration will act to further dampen consumer spending. Business investment remains very low, with corporate lending continuing to be subdued.
Overall it would seem that confidence in the growth of the economy has not been as great as initially forecast by the RBNZ in their previous statements. Alan Bollard noted that the pace and extent of further OCR increases is likely to be more moderate than was projected in the June Statement. Even Tony Alexander from BNZ said on 29th July that the prediction for the OCR to reach 5 percent by 2011 with a peak of 6 percent in 2012 may have been a little overzealous.
However, on the brighter side Alan Bollard did note that there are certain sectors within the New Zealand economy that have been experiencing greater growth than others. In particular manufacturing confidence had remained at its elevated level and forestry exports are continuing to expand. He also pointed out that even after the increase to 3 percent it is still believed that the OCR is very supportive of the current economic activity.
With the mixed opinions and surrounding evidence on the current status of the New Zealand economy we will watch with interest until the next OCR update on 16th September 2010.
To view the full statement released by RBNZ please click here.
Source:
The Reserve Bank of New Zealand News Releases.
BNZ weekly overview 29th July 2010
|
