Bollard keeps OCR at 3% but sounds more optimistic note
The Reserve Bank appears moderately more upbeat about the economy than it was a few months ago.
The Reserve Bank appears moderately more upbeat about the economy than it was a few months ago.
In the short statement accompanying his decision to leave the official cash rate (OCR) at 3% this morning, Reserve Bank governor Alan Bollard said although the latter part of 2010 was weak, there are signs the economy is turning.
“Forward indicators of activity have firmed somewhat. Trading partner activity continues to expand and New Zealand’s export commodity prices have increased further.”
Domestically, business mood surveys are showing a pick up in confidence and – crucially – recent data from Statistics New Zealand shows imports of capital equipment, particularly plant and machinery, are growing.
That suggests that quite a few savvy businesses are using the high New Zealand dollar to pick up capital equipment at a cheaper price, and also that – unlike the last pick up in business mood a year ago – they are putting their money where their confidence is.
Dr Bollard also noted “tentative” signs the housing market is stabilising.
As for when any change to the OCR might happen, Dr Bollard repeated – word-for-word – his December statement.
“While interest rates are likely to increase modestly over the next two years, for now it seems prudent to keep the OCR low until the recovery becomes more robust and underlying inflationary pressures show more obvious signs of increasing.”
Overnight index swap (OIS) markets have priced in a rise in the OCR from July but most market economists are now expecting that is the earliest probable date for any rate increase.
NBR staff
Thu, 27 Jan 2011
Thu, 27 Jan 2011
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Bollard keeps OCR at 3% but sounds more optimistic note
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