RBNZ predicts steady rise in interest rates
"New Zealand's export commodity prices have increased sharply over the past few months, boosting export incomes," Bollard said in a statement in Wellington today. The recovery in Asia, Australia and the US "has so far offset weak growth in some other export markets."
The rate hike comes after Bollard kept the OCR at a record low 2.5% for 13 months in response to New Zealand's worst recession in 18 years amid a credit crunch that saw international finance lines dry up, sapping lenders' ability to fund businesses and households alike.
Still, he was more opaque about future rate hikes, saying that although the current outlook and previous signalling dictated today's increase, "further removal of stimulus will be reviewed in light of economic and financial market developments."
In raising rates, he has judged there is sufficient domestic momentum to make up for the drag on global growth from Europe's debt crisis. Europe makes up about 10% of New Zealand's total trade, and Bollard said in the report that the slowdown in the Euro-zone "would only have a small direct impact" on the local economy, with the main impact coming in "upward pressure on the cost of funds to the banking system."
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