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26-04-2012

Reserve Bank leaves OCR unchanged at 2.5%

Landlords.co.nz

The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5%.

Reserve Bank Governor Alan Bollard said inflation was restrained and is expected to remain close to the middle of the Bank's target range.

"The domestic economy is showing signs of recovery. Housing market activity continues to increase and a recovery in building activity appears to be underway, as forecast. That recovery will strengthen as repairs and reconstruction in Canterbury pick up later in the year.

"However, the global outlook remains of concern. Near-term indicators have moderated and financial market sentiment is still fragile.

"The New Zealand dollar has stayed elevated despite recent falls in commodity prices. Should the exchange rate remain strong without anything else changing, the Bank would need to reassess the outlook for monetary policy settings.

"For now, it is appropriate for the OCR to remain at 2.5 percent."

ASB economist Nick Tuffley said the Reserve Bank statement reinforced the risk of later starts to OCR increases from their December prediction.

He also said that for the Reserve Bank, "the housing market, in general, risks becoming more prominent on the radar."

"We have held to our view that the first OCR increase will occur in December, but the risks remain skewed to a later start," he said.

"We continue to expect the eventual tightening cycle will be gradual, with OCR increases at MPS releases - i.e. every three months on the way to a peak of 4% in early 2014."

Tags: ocr

Source: Landlords.co.nz

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