19 April 2001

Reserve Bank cuts OCR to 6 per cent

Reserve Bank Governor Don Brash today cut the Official Cash Rate from 6.25 per cent to 6 per cent, but in doing so he indicated that there were strong grounds for being cautious about further cuts.

Dr Brash said: "The main reason for cutting the OCR again is slowing growth in New Zealand's main trading partners. This slowdown in global growth will have an adverse impact on demand for our exports, and is likely to reduce inflationary pressures in New Zealand.

"However, world prices for our commodities remain robust, and the exchange rate has fallen back since March. These unexpected developments, if they persist, could take much of the disinflationary sting out of weakening global demand.

"In addition, significant parts of the economy are operating near to capacity and the labour market is relatively tight.

"It is for these reasons that we are only cautiously moving the OCR in the same direction as official interest rates in other countries. We will be assessing the emerging data carefully and will next review the OCR at the May Monetary Policy Statement to be released on 16 May," Dr Brash concluded.

For further information contact
Paul Jackman
Corporate Affairs Manager
Ph 04 471 3671, 021 497 418, home 04 938 8177, Jackmanp@rbnz.govt.nz