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September 11, 2008

New Zealand cuts OCR by 50 basis points

by Richard Kilner

Story link: New Zealand cuts OCR by 50 basis points

The Reserve Bank of New Zealand has slashed the Official Cash Rate (OCR) to 7.5%, a cut of 50 basis points from the previous level of 8%.

Governor Alan Bollard has stated that the New Zealand economy is in a decline, largely due to the household sector.

Bollard added that, globally, the financial situation remained turbulent and, domestically, the economy was likely to be caught between rising prices and falling demand.

However, he went on to forecast an improvement in domestic economic activity due to tax cuts and increased government spending.

The household sector would lag behind, with an extended period of below average growth.

General inflation is thought to peak at 5% in the present month, but food inflation will remain at a high level into the next year.

The Reserve Bank’s decisions regarding OCR will hinge upon a combination of exchange rates and lessening inflation.

 

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