OCR unchanged at 8.25%

The official cash rate (OCR) will remain unchanged at 8.25%.

Thursday, October 25th 2007, 9:15AM

by The Landlord

Reserve Bank Governor Alan Bollard said: "The outlook for the New Zealand economy and interest rates remains broadly consistent with the view outlined in the September Monetary Policy Statement. The labour market remains tight, domestic income growth continues to expand on the back of strong commodity prices, and core inflationary pressures persist. On the other hand, there are signs the housing market is moderating.

"Despite ongoing surpluses in the government's operating balance, fiscal policy is contributing to inflationary pressure. Any further easing in fiscal policy beyond that already announced will add further upside risks to medium-term inflation.

"There are a number of other upside risks to inflation, including the direct effects of the proposed greenhouse emissions trading scheme and rising global food prices.

"While the turbulence in global financial markets has eased somewhat, considerable uncertainty remains. This poses a downside risk for our key trading partner economies. In addition, the New Zealand dollar remains relatively high, restraining the externally-focused sectors of the economy.

"We believe that the current level of the OCR remains consistent with future inflation outcomes of 1 to 3% on average over the medium term."

Another related story can be found on Good Returns

Bollard holds rates but warns about government spending
Reserve Bank governor Alan Bollard surprised nobody by leaving interest rates unchanged but he used his statement to take a swipe at government spending. [more]

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