Thursday 26th July 2007
|Text too small?|
Bollard raised his official cash rate (OCR) from 8% to 8.25%. It is the fourth time since March that Bollard has hiked the OCR. He singled out the tight labour market, high capacity use and rising oil and food prices as evidence of inflationary pressures.
Bollard has been particularly concerned about the rampant housing market and noted early signs of New Zealanders moderating their borrowing.
"Provided they keep this up, and the pressure on resources continues to ease, we think the four successive OCR increases we have delivered will be sufficient to contain inflation," Bollard said.
Brendan O'Donovan, chief economist at Westpac, says that Bollard is hoping he doesn't need to raise rates again.
"It's quite a cleverly crafted statement to try to maintain pressure on the domestic economy and borrowing and to take some of the upwards pressure off the currency," O'Donovan says.
The early indications were that had worked - while the currency spiked up immediately after the hike was announced, once the commentary was published, the New Zealand dollar eased somewhat. From about 80.25 US cents before the announcement, the currency had fallen to 80.07 cents 15 minutes later. The New Zealand dollar has climbed from about 60 US cents a year ago.
"Doing more rather than less is ultimately better for getting the currency down," says Darren Gibbs at Deutsche Bank. If the market believes that Bollard is serious about slowing the economy, there is less justification for such a high currency, he says.
"The banks has said it's done enough," Gibbs says. "Some would suggest that may be aimed at the politicians. Bollard will be aware that they're (the central bank) going to take some flack today."
No comments yet
AIA June 2020 Monthly Traffic Update and July 2020 Preview
PCT - Delivering on strategy underpins strong operating result
KFL - August 2020 monthly update
BRM - August 2020 monthly update
MLN - August 2020 monthly update
Further COVID-19 Restrictions at SkyCity’s New Zealand Properties
FY20 results guidance met, Results date, Banking Facility
Sky sells OSB assets to NEP NZ, secures 10 year partnership
NZX fully operational - announcement re COVID-19
Heartland Market Update