RBNZ Holds Official Cash Rate at 2.50%

The Reserve Bank of New Zealand maintained the Official Cash Rate (OCR) unchanged at 2.50%.  The Bank Said: "As GDP growth picks up, underlying inflation is expected to rise.  A gradual increase in the OCR over the next two years will be required to offset this, such that CPI inflation tracks close to the midpoint of the target band over the latter part of the projection.  The pace and timing of increases will be guided by the speed of recovery, but for now the OCR remains on hold."

Previously the Bank also maintained the OCR unchanged at 2.50%, the Bank cut the rate by 50 basis points in March this year, following the Canterbury earthquake.  The market is pricing in a rate hike in December this year.  New Zealand reported consumer price inflation of 4.5% in Q1, up from 4.0% in Q4 of 2010, and above the official inflation target of 1-3% as short term factors caused a spike in prices.

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