New Zealand’s OCR stays at 8.25%

by Richard Kilner

Story link: New Zealand’s OCR stays at 8.25%

The Reserve Bank of New Zealand has kept its Official Cash Rate (OCR) unchanged on 8.25%.

Governor Alan Bollard referred to the economic conditions, both global and national, when explaining the decision to neither increase nor decrease the OCR.

Oil and food prices are being pushed ever higher, leading to inflationary pressures, Bollard stated.

This is coupled with an ongoing credit crisis which has caused a slowdown in many economies across the world, most particularly in the global housing sector.

The result of this for New Zealand is weak activity combined with high inflation, according to the governor.

Bollard has forecast that CPI will peak in September, hitting a high of 4.7%, adding that regardless of the present high cost of food and fuel there is an underlying and persistent inflation in New Zealand.

He went on to predict that in the medium term inflation would return to a more comfortable level, making his prediction contingent upon commodities stabilising in price, amongst other factors.

Growth in New Zealand over the course of 2008 is expected to be very slight, with only a moderate recovery afterwards.