New Zealand slashes rates by 100 basis points

by Richard Kilner

Story link: New Zealand slashes rates by 100 basis points

The Reserve Bank of New Zealand has slashed the Official Cash Rate (OCR) by 100 basis points, taking it from 7.5% to 6.5%.

Governor Alan Bollard attributed the strong measure to the worsening climate of global growth and continuing difficulties in the financial markets.

Bollard also stated that international pressures would continue to constrain the New Zealand economy and predicted a fall in export demand coupled with weakening availability of credit.

Because of this, he forecasts a decline in spending by both businesses and consumers as they take a more cautious approach.

However, Bollard does expect inflation to return to the target range of 1-3% as oil prices come down, although he expressed some concerns at stubborn home-grown inflationary pressures.

He ended his statement by reaffirming the Reserve Bank’s commitment to focusing upon medium term inflation, and predicted further rate cuts in the future.