RBNZ cuts OCR to 6.5% and expects to cut again

RBNZ cuts OCR to 6.5% and expects to cut again

The Reserve Bank of New Zealand has cut the Official Cash Rate by an unprecedented 100 basis points to 6.5%, in line with market expectations. Reserve Bank Governor Alan Bollard said "ongoing financial market turmoil and a deteriorating outlook for global growth have played a large role in shaping today's decision." Bollard said growth would be slower than the 0.5% previously forecast for 2008/2009 (March year) by the Reserve Bank in its September Monetary Policy Statement. He also said inflation would return to the 1-3% target band by the middle of 2009, which is about a year earlier than forecast in September. "Should the outlook for inflation evolve as projected, we would expect to lower the OCR further," Bollard said, adding however that the timing and extent of the OCR cuts would depend on evidence of easing domestic inflationary pressures as well as the global financial situation.

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