It's different this time. That's the message from Reserve Bank Governor Alan Bollard at this morning's press conference after his decision to leave the Official Cash Rate on hold at a record low 2.5% until the middle of 2010. Bollard said consumers were being much more careful about taking on more debt to go on a spending spree in the wake of the financial crisis. That's why he is less worried about his forecast of house price inflation of 12% by early March leading to a consumption and inflation boom. "We think New Zealanders have taken some lessons out of the financial crisis," Dr Bollard told the news conference. "We don't see the signs of a debt fueled asset bubble," he said.
Meanwhile, Bollard also said the bank was less concerned about banks not passing on lower interest rates to consumers. Earlier this year the RBNZ expressed concern that variable mortgage rates had not been cut enough after very sharp cuts in the OCR, but since then there have been reductions in variable mortgage rates. "We have less concerns about that. They (mortgage costs) are reflecting real costs of raising funds internationally," Bollard said.
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