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Careful management of inflationary pressures needed

13 March 2014

Careful management of inflationary pressures needed

Prudent advance signalling will have led to today’s OCR change being factored in by markets, easing concerns of a strengthened dollar, says BusinessNZ.

Chief Executive Phil O’Reilly says changes in interest rates need to take into account the unique situations facing markets since the global financial crisis, including the fact that globally and in New Zealand, interest rates are at historic low levels.

“The lessons of the past suggest that if we don’t start early enough, we may have to tighten more later.

“Given that monetary policy is focused on inflation one or two years down the track, it will be important that the Reserve Bank monitors activity carefully, taking account of factors driving inflationary pressures.

“Government can support the Reserve Banks policy through controlling spending, sound regulatory policy and promoting competitive markets,” Mr O’Reilly said.

“A key concern is to ensure that land supply is not artificially constrained, which could cause further inflation in the housing market.”

ENDS

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