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Reserve Bank reinforces last week's statement

Reserve Bank of New Zealand

3 May 2005

News Release

Reserve Bank reinforces last week's statement

Speech excerpt on monetary policy

From an address by
Dr Alan Bollard
Reserve Bank

As part of a presentation to a Masterton District Council Business
Community Breakfast Meeting

Reserve Bank Governor Alan Bollard today reinforced his statement of 28
April 2005 that economic data suggests that underlying demand and
inflation pressures remain strong and that, in this environment, further
policy tightening cannot be ruled out.

Dr Bollard was speaking to a Masterton District Council Business
Community Breakfast Meeting.

"Last week I announced that the Official Cash rate (OCR) would remain at
6.75 per cent," Dr Bollard said. "But I reiterated our concerns about
the persistence of inflation pressures in the economy, which are
severely limiting our inflation headroom."

Dr Bollard said that over the coming weeks the Bank would be reviewing
its forecasts in more detail, in particular to assess the strength of
pipeline interest and exchange rate effects, household demand and
ongoing labour market pressures.

"This assessment will be used to confirm whether further policy
tightening is warranted at the June 2005 Monetary Policy Statement.
Certainly, the current outlook offers no scope for an easing of policy
in the foreseeable future."


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