(28 October 2010 – New Zealand) The Reserve Bank of New Zealand has decided to leave the official cash rate on hold at 3 percent due to weaker than expected economic conditions.The Reserve Bank of New Zealand’s governor Alan Bollard said recent economic figures had been weaker than earlier expected, however high export prices and the rebuilding needed after the Canterbury earthquake last month would support the economy in the coming year.
The medium-term outlook for the New Zealand economy remained broadly in line with that assumed at the time of the September Monetary Policy Statement he said.
Overall, continued economic growth was expected to gradually absorb current surplus capacity over the next few years, Dr Bollard said.
Headline inflation was expected to move higher following the recent increase in the rate of GST.
The subdued state of domestic demand suggested this inflation spike would have limited impact on medium-term inflation expectations.
‘While it is appropriate to keep the OCR on hold today, it remains likely that further removal of monetary policy support will be required at some stage,’ Mr Bollard said.