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OCR set at 6 per cent

The Reserve Bank today increased the Official Cash Rate (OCR) by 0.25 per cent to 6 per cent.

This increase came with the Reserve Bank’s scheduled April OCR review.

Reserve Bank Governor Don Brash said today, “The risks of rising inflation are gradually increasing. The New Zealand economy has now been growing robustly for almost two years, supported by trading partner economic growth and stimulatory monetary conditions. Locally, the December quarter GDP numbers confirmed that the economy grew strongly in the second half of last year. That growth was broadly based, although boosted by the agricultural sector’s recovery from two serious droughts.

“Taken as a whole, recent indications are that growth prospects here and abroad remain at least as strong as we expected last month, and that the economy's surplus capacity appears to have been more or less exhausted.

“The Reserve Bank has been gradually raising the OCR over the last six months or so. These moves have been consistent with our own projections – reaffirmed most recently in the March Monetary Policy Statement – suggesting that firmer monetary conditions will be needed if we are to give ourselves the best chance of solid growth continuing without inflation problems emerging. Today’s move should be seen in this light.

“Sharemarkets internationally have been quite volatile. At this stage, financial markets appear to have taken the view that global growth and inflation prospects have not been materially adversely affected and continue to expect further increases in official interest rates in most major economies over the next few months. But naturally we will continue to monitor these international markets closely,” Dr Brash concluded.

The next scheduled OCR announcement will be on 17 May with the release of the May Monetary Policy Statement.

For further information contact:
Lisa Weekes
Communications Officer
Phone 04 471 3767, pager 026 103 787
Email weekesl@rbnz.govt.nz

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