Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


RBNZ: OCR raised to 5.75 per cent


15 March 2000
9.00 a.m.

OCR raised to 5.75 per cent

The Reserve Bank today increased the Official Cash Rate (OCR) from 5.25 per cent to 5.75 per cent with the release of the March 2000 Monetary Policy Statement.

Reserve Bank Governor Don Brash said: "Even after today's adjustment to the OCR, we see monetary conditions as providing stimulus to the economy, though less than previously. Today's announcement reflects the fact that the economy has been growing since the middle of 1998, to the point where, in our judgement, the spare capacity evident over the past two years or so has been almost completely used up.

"Inflation presents no immediate threat. Indeed, recent surprisingly low inflation data raise the possibility that the onset of inflationary pressures may be weaker, or more delayed, than earlier experience would suggest. But the downward pressure on inflation from surplus productive capacity in the economy has now all but gone. Were monetary conditions to remain as stimulatory as in recent months, the risk of inflation becoming a problem would increase, and potentially require more marked increases in the OCR later on.

"In that sense, today's action is fully consistent with the recent amendment to the Policy Targets Agreement, which requires the Bank to "avoid unnecessary instability in output, interest rates and the exchange rate". In other words, moderate action now reduces the risk of having to take more vigorous action later.

"Looking further ahead, there is considerable uncertainty as to how much the strong economic growth that we expect - supported by robust demand from our trading partners, a low exchange rate, and a recovery from two years of drought - will eventually flow through into inflationary pressure. Our current projections suggest that monetary policy will need to restrain demand somewhat over the next two years, although less so than at this stage of previous business cycles. Whether we will actually need more or less tightening than that depends on how the economy develops compared to what we now project.

"One important issue will be how the exchange rate evolves, and why. If the exchange rate remains at a low level because of weak commodity prices, for example, there may be no need to adjust monetary policy. But if the exchange rate remains low despite improving commodity prices, then overall demand pressures may grow, and may require more tightening in monetary policy than now projected. At the moment the Bank is reserving its judgement on this," Dr Brash concluded.

For further information contact
Paul Jackman
Corporate Affairs Manager
Ph 04 471 3671, hm 04 938 8177, pager 026 105 085, E mail

© Scoop Media

Business Headlines | Sci-Tech Headlines


Ground Rules: Government Moves To Protect Best Growing Land

“Continuing to grow food in the volumes and quality we have come to expect depends on the availability of land and the quality of the soil. Once productive land is built on, we can’t use it for food production, which is why we need to act now.” More>>


Royal Society: Calls For Overhaul Of Gene-Technology Regulations

An expert panel considering the implications of new technologies that allow much more controlled and precise ‘editing’ of genes, has concluded it’s time for an overhaul of the regulations and that there’s an urgent need for wide discussion and debate about gene editing... More>>


Retail: Card Spending Dips In July

Seasonally-adjusted electronic card spending dipped in July by 0.1 percent after being flat in June, according to Stats NZ. Economists had expected a 0.5 percent lift, according to the median in a Bloomberg poll. More>>


Product Stewardship: Govt Takes More Action To Reduce Waste

The Government is proposing a new way to deal with environmentally harmful products before they become waste, including plastic packing and bottles, as part of a wider plan to reduce the amount of rubbish ending up in landfills. More>>


Earnings Update: Fonterra Sees Up To $675m Loss On Writedowns

“While the Co-op’s FY19 underlying earnings range is within the current guidance of 10-15 cents per share, when you take into consideration these likely write-downs, we expect to make a reported loss of $590-675 million this year, which is a 37 to 42 cent loss per share." More>>