OCR unchanged at 2.5 percent
The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5 percent.
Reserve Bank Governor Alan Bollard said:
“As foreshadowed in the September Statement, global conditions have deteriorated. Continuing difficulties related to sovereign and bank debt in a growing number of European economies have resulted in high levels of volatility in financial markets. There has also been a softening in international economic activity, including in the Asia-Pacific region.”
Mr Bollard then went on to discuss New Zealand’s current economic conditions. He seems to believe while business confidence had declined and investment spending has remained weak during the global financial crisis, it seems to have had a limited effect on New Zealand’s current economic situation.
Mr Bollard continued by saying:
“Domestically, economic activity continues to expand, though at a modest pace. Although off their peaks, export commodity prices remain elevated. In addition, the depreciation of the New Zealand dollar provides some support for the tradable sector of the economy. Over time, repairs and reconstruction in Canterbury will also provide a significant boost to demand for an extended period.”
Mr Bollard still believes that because of the high degree of uncertainty around the global markets there is a risk that conditions could weaken further, which is why he has decided to leave the OCR at its current rate even though it has not been changed since it was dropped 0.5% on the 10th of March 2011 .
Sources:
http://www.rbnz.govt.nz/monpol/statements
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10771557
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