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Reserve Bank of New Zealand sits on the fence
January 25th, 2008
…. Firstly the key news at home
As expected, the Reserve Bank of
It essentially sat on the fence and steered away from any strong signal one way or the other on where the next move would be.
The Reserve Bank cited more global market turmoil as one reason why it shouldn’t raise interest rates to dampen persistent inflation.
However, holding rates as the same time as the US Federal Reserve is cutting has widened
Immediately after the Reserve Bank released its statement explaining its decision to keep rates on hold, the
Reserve Bank Governer Alan Bollard said in the statement that the outlook was consistent with the bank’s view of inflation back in its December Monetary Policy statement, in which it expressed concerns about inflationary pressures.
Despite the fears of a recession in the
However, ongoing inflationary pressures were underpinned by an expansionary fiscal policy, and rising food and energy prices, which will be under further pressure with the Emissions Trading Scheme in a year’s time, Bollard said.
This is at least the third strong warning from Bollard about the inflationary effects of increased government spending and the prospects of tax cuts on offer from both major parties in an election year.
One thing he did point out is that he’ll be watching the Asian and Australian economies closely. Both are still growing strongly and both have inflation problems. The Reserve Bank of
He said that : On balance, the outlook for interest rates is little changed from the December Monetary Policy Statement, but the level of uncertainty has increased.
Tags: Alan Bollard, OCR, Reserve Bank
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