Sharechat Logo

OCR reduced to 5%

Thursday 4th December 2008

Text too small?
The Reserve Bank today reduced the official cash rate (OCR) from 6.5% to 5.0%.

Reserve Bank Governor Alan Bollard commented that "ongoing financial market turmoil and the marked deterioration in the outlook for global growth have played a large role in shaping today's decision. Activity in most of our trading partners is now expected to contract or grow only very slowly over the next few quarters.

"Economic activity in New Zealand will be further constrained as a result, compared with our view in October.

"Inflation is abating here and overseas as a consequence of these developments. We now have more confidence that annual inflation will return comfortably inside the target band of 1 to 3% some time in the first half of 2009 and remain there over the medium term. However, we still have concerns that domestically generated inflation (particularly local body rates and electricity prices) is remaining stubbornly high.

"Today's decision brings the cumulative reduction in the OCR since July to 3.25% , and takes monetary policy to an expansionary position. Given recent developments in the global economy, the balance of risks to activity and inflation are to the downside. Thus it is appropriate to deliver this reduction quickly to support the economy and keep inflation from falling below the target band.

"Monetary policy is working together with the depreciation of the New Zealand dollar and the fiscal stimulus now in train, to provide substantial support to demand over the period ahead and to create the conditions for some rebound in growth as global conditions improve.

"To ensure the response we are seeking, we expect financial institutions to play their part in the economic adjustment process by passing on lower wholesale interest rates to their customers.

"Further movements in the OCR will be assessed against emerging developments in the global and domestic economies and the response to policy changes already in place."

For an updated report, click here and to keep an eye on rate movements, visit the Mortgage Centre on www.goodreturns.co.nz

Good Returns is the biggest and most comprehensive news centre in New Zealand for financial advisers. For more of the week's top news stories for financial advisers visit www.goodreturns.co.nz

To make it as easy as possible for you to keep up to date with industry news and commentary you can subscribe to one of our many free email newsletters or RSS feeds



  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:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report