RBNZ: OCR unchanged at 6.5 per cent

Embargoed until
Date
16 August 2000
NEWS RELEASE
Time
9.00 am

OCR unchanged at 6.5 per cent

The Reserve Bank today announced that it was leaving the Official Cash Rate (OCR) unchanged at 6.5 per cent.

That's come with the release of the Reserve Bank's August Monetary Policy Statement (MPS).

Commenting on the announcement, Reserve Bank Governor Don Brash said: "Since the Reserve Bank's May MPS, a lot has changed in the New Zealand economy.

"Both business and consumer confidence have fallen sharply, which appears to have led to some deferment of spending, new investment and employment. As well, the exchange rate has fallen markedly to record lows.

"CPI inflation now looks set to spike to the top of the Bank's inflation target. But this is mainly due to sharp rises in oil prices and indirect taxes on cigarettes, which the Reserve Bank is able to ignore, so long as they do not trigger an upsurge in general inflation.

"It now appears that the economy may have contracted slightly in the June quarter and that growth in the September quarter may also be weak. As a result, pressure on the economy's capacity seems likely to be less over the next few quarters than previously expected.

"Clearly, the data on economic activity in a small economy such as ours tend to be 'noisy', and the Bank needs to steer through that noise as best it can. Given the uncertainty about the outlook, leaving the Official Cash Rate unchanged seems the prudent thing to do right now," Dr Brash concluded.

ENDS

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