Interest rates unchanged

By Phil Boeyen, ShareChat Business News Editor

Wednesday 3rd October 2001

The Reserve Bank has left the Official Cash Rate unchanged at 5.25% despite a likely cut today from its Australian counterpart and an overnight drop from the US Federal Reserve.

New Zealand's recent robust balance of payments and trade figures are likely behind the decision, added to the 50 point reduction already taken in the wake of the US terrorist attacks.

Reserve Bank governor, Don Brash, admits the outlook for the world economy remains uncertain and has deteriorated since the US attacks, however he says that while the NZ economy will inevitably feel some backwash, it appears to be holding up.

"Our decision to cut the OCR by 50 basis points two weeks ago was a precautionary move that recognised the inevitable adverse effect and the likely impact on confidence. But how large those effects will be, and how long they will last, remains unclear.

"At this stage, it appears best to leave the OCR unchanged."

Mr Brash says the bank will have an opportunity for a fuller review of the outlook for economic activity and inflation, and the risks around that outlook, in its next monetary policy statement due in the middle of November.

The US Federal Reserve yesterday cut its federal funds rate to 2.5% from 3%, the lowest level for nearly 40 years, as it tries to avoid recession in the world's economic powerhouse.

It is the ninth cut in US interest rates this year.

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