Wednesday, December 7, 2011

RBNZ Continues Hold on OCR at 2.50%

RBNZ keeps the OCR on hold at a record low 2.50%
The Reserve Bank of New Zealand kept the Official Cash Rate (OCR) on hold at 2.50%, noting the impact of global developments.  The Bank Said: "Domestically, economic activity continues to expand, though at a modest pace. Although off their peaks, export commodity prices remain elevated. In addition, the depreciation of the New Zealand dollar provides some support for the tradable sector of the economy. Over time, repairs and reconstruction in Canterbury will also provide a significant boost to demand for an extended period. Annual headline inflation is estimated to have returned within the Bank's 1 to 3 percent target band in the December quarter. Underlying inflation continues to sit close to 2 percent. In addition, wage and price setting pressures have remained contained."

Previously the Bank also held the OCR unchanged at 2.50%, while the Bank cut the rate by 50 basis points in March this year, following the Canterbury earthquake.  New Zealand reported consumer price inflation of 4.6% in Q3 this year, compared to 5.3% in Q2, 4.5% in Q1, and 4.0% in Q4 of 2010, and above the official inflation target of 1-3% as short term factors such as tax increases caused a spike in prices.  

The New Zealand economy grew 0.1% q/q in Q2 (0.9% in Q1), placing it up 1.5% (1.4% in Q1) on an annual basis.  The New Zealand dollar (NZD) is up about 1% against the US dollar so far this year, having touched all new highs close to 0.88 in July/August, meanwhile the NZDUSD last traded around 0.78.

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