18 August 1999
OCR unchanged: may need to rise soon
The Reserve Bank today left the Official Cash Rate (OCR) unchanged. However, it indicated that an increase before the end of the year is increasingly likely.
That's come with the release of the Bank's August 1999 Monetary Policy Statement.
Reserve Bank Governor Don Brash said: "The world economy is looking considerably stronger. As well, the New Zealand economy has been growing at about 3 per cent per annum over the last 12 months and credit continues to expand briskly. Inflation pressures now appear likely to build earlier than we projected in the May Monetary Policy Statement.
"These factors, on their own, suggest that it is time for the Bank to begin to ease back on the monetary policy `accelerator'.
"However, New Zealand business and consumer confidence still appear fragile, and there are some obvious questions hanging over the world economy, such as the possibility of a sharp fall in US share prices. As well, long-term interest rates, including fixed mortgage rates, have already risen quite sharply, which should begin to dampen demand.
"Balancing these factors, the Bank has decided to keep the OCR where it is for the moment, but also to signal that a tightening soon is increasingly likely, if events evolve as expected.
"This should not come as a surprise to financial markets, which for some time have been expecting a rise in the OCR in the next three to six months," Dr Brash concluded.
For further information contact
Paul Jackman
Corporate Affairs Manager
Phone 04 471 3671, home 04 938 8177, pager 026 105 085,
Email jackmanp@rbnz.govt.nz
