New Zealand cuts OCR by 25 basis points

by Richard Kilner

Story link: New Zealand cuts OCR by 25 basis points

Today the Reserve Bank of New Zealand cut 25 basis points from the Official Cash Rate (OCR), resulting in a fall from 8.25% to 8%.

Since the release of the Reserve Bank’s Monetary Policy Statement in June more bad news has emerged internationally, Governor Alan Bollard explained, leading to the possibility of further economic damage in New Zealand.

The international credit market has continued to tighten, with the costs of borrowing abroad rising.

Governor Bollard has said that the rate cut has been made in a bid to lessen the impact of this on the borrowing costs that individuals and firms are subject to in New Zealand.

He went on to forecast that, although food and oil inflation has pushed the CPI rate up to 5%, he believes that in the medium term it will fall back to within the Reserve Bank’s stated target range.

New Zealand’s economic activity will remain weak for the rest of the year, he predicted, before beginning to improve in 2009.