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Stay of hand urged on interest rate rise

Stay of hand urged on interest rate rise

Exporters are calling for a stay of hand by the Reserve Bank Governor on raising the official cash rate next week.

The announcement is due Thursday, March 10th.

The Employers & Manufacturers Association (Northern) says the inflation picture for the mid term is very mixed, and there has been a marked change in business confidence since the last major readings of the economic outlook in early February.

“Inflationary pressures are finely balanced, but the risks to the economy of another interest rate rise now are just too great,” said EMA’s chief executive, Alasdair Thompson.

“Exporters are advising the forward cover on their exchange rate exposure is running out, and earnings are being tightly squeezed by the excessively high exchange rate.

“The raising of interest rates further would strengthen the kiwi dollar by attracting another flush of overseas currency to take advantage of our world beating interest rates.

“In contrast, to our official interest rate of 6.5 per cent, the US and Canada rate is 2.5 per cent, Europe 2 per cent, the UK’s 4.75 per cent and Australia, 5.5 per cent.

“The Reserve Bank’s call will be close, though the economy is undoubtedly slowing and there is no need to brake harder.

“Business is calling on the Reserve Bank Governor to take into account the very mixed global picture. Growth in Australia, Germany and Japan has slowed. Export margins are being cut to the bone.

“If a poll was taken of business confidence now we predict it would show a marked shift into negative territory.”

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