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Reserve Bank urged to amend interest rate forecast

Media Release Friday, June 14th, 2002

Reserve Bank urged to amend interest rate forecast

The Reserve Bank should urgently amend its forecasts for the economy from last month, the Employers & Manufacturers Association (Northern) says.

"The Bank's forecast assumed only a 'gradual appreciation of the New Zealand dollar' but it's gone up 16 per cent in the last few weeks, said Alasdair Thompson, EMA's chief executive.

"Acting Reserve Bank Governor Rod Carr's prediction that official interest rates would rise to seven per cent by early next year was the trigger for the dollar to shoot up.

"Fast moving money from the US flooded in to take advantage of our 90 day bill rates over 5.5 per cent in a one way bet the exchange rate would rise to doubly reward the speculation. We said this in our statement on May 21st.

"The Reserve Bank's position is now stalling economic growth. Smaller exporters are experiencing far lower returns than expected. New investment is going on hold.

"The drop in food prices today is a further confirmation the Bank got it wrong.

"The Bank should issue a revised statement urgently noting the lack of inflationary pressure, the fall in commodity prices and that the economy is already off the boil."

Comments: Alasdair Thompson tel 09 367 0911 (b)

09 303 3951 (h)

0274 982 024

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