Reserve Bank of New Zealand Holds OCR at 2.50%

The Reserve Bank of New Zealand held the Official Cash Rate (OCR) unchanged at 2.50%, but signaled plans to increase the rate.  The Bank Said: "Provided current global financial risks recede and the economy continues to recover, the Bank sees little need for the March 2011 'insurance' cut to remain in place much longer.  The current very high value of the New Zealand dollar is acting as a drag on the New Zealand economy.  If this persists, it is likely to reduce the need for further OCR increases in the short term."

Previously the Bank also held the OCR steady at 2.50%, the Bank cut the rate by 50 basis points in March this year, following the Canterbury earthquake.  New Zealand reported consumer price inflation of 5.3% in Q2 this year, up from 4.5% in Q1, and 4.0% in Q4 of 2010, and above the official inflation target of 1-3% as short term factors such as tax increases caused a spike in prices.  The New Zealand dollar (NZD) has surged 20% over the past year; trading just beyond a record high of 0.87 against the US dollar.

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