Sharechat Logo

OCR remains the same

Thursday 26th October 2006

Text too small?
The Reserve Bank has elected to keep the official cash rate at 7.25%, although some economists expected it to rise today.

"Since our September Monetary Policy Statement, there has been a significant improvement to the near-term inflation outlook, mainly as a result of the recent decline in oil prices," the central bank says.

"We expect lower fuel prices, together with the recent rebound in the exchange rate and Statistics New Zealand's reweighting of the CPI, to give an unusually low December quarter CPI increase. These are temporary factors, however, and, apart from the likely favourable impact on inflation expectations, they are not expected to impact materially on medium-term inflation."

Indicators of medium-term inflation pressures remain significant. Overall GDP growth in the second quarter was consistent with our September projections and the continued rebalancing of demand away from domestic spending towards exports.

Continued strength in most of New Zealand's international markets and a return to a downward trending NZ dollar exchange rate should support this rebalancing. On the domestic side, however, the housing market remains resilient, supported by net inward migration and ongoing mortgage credit expansion at low interest margins. Further, we could see a pickup in household consumption in the third quarter as a result of the drop in petrol prices. On balance, inflation pressures appear to be abating gradually. But some indicators of resource pressures, such as high capacity utilisation and a tight labour market, continue to signal caution.

Taking all of this into account, monetary policy pressure will need to be maintained for some time to bring inflation back sustainably within the 1-3% target band.

In this regard, the policy outlook is little changed from our September statement. The balance of inflation risks remains skewed to the upside.

Further monetary policy tightening cannot be ruled out, and any easing of policy remains a considerable way off.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar falls on news RBNZ is looking at "unconventional" policy
Wrightson capital return gets shareholder approval
Morrison & Co eyes asset sales from first PIP Fund
Improved transmission pricing may save $2.7 bln - Electricity Authority
Precision Foundry receivers say no money for unsecured creditors
23rd July 2019 Morning Report
NZ dollar tad weaker, ECB, Federal Reserve in focus
MARKET CLOSE: NZ shares outperform Asia as exporters gain; Sky leads market higher
Significant shortfall for subbies in Ebert receivership
Transpower sees no risk to credit metrics from incentive change

IRG See IRG research reports