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Forex Commentary 12.8
Reserve Bank of New Zealand raises official cash rate to 7.25 pct
Wednesday, December 7, 2005 10:16:15 PM http://www.afxpress.com
SYDNEY (AFX) - The Reserve Bank of New Zealand said it has raised its official cash rate 25 basis points to 7.25 pct. The central bank cited strong household spending, a buoyant housing market and persistence of inflationary pressures as reasons for the move. The rate is the highest in the industrialized world.
The increase had been widely anticipated and follows a 25 basis points rise in October. The central bank's governor, Allan Bollard, said the household sector is the main driver of continuing strong domestic demand, linked to a still buoyant household sector. RBNZ said, in a statement, increasing government spending and continued strong business investment are also boosting total demand. "The resulting excess demand, reflected in a growing current account deficit, is continuing to fuel inflation," it said.
The central bank said it remains concerned about the tightness of resources and the persistence of inflation pressures. It said the nation's exporters and other businesses exposed to the very high exchange rate are under considerable pressure and general business sector confidence is falling in the face of declining profit margins. The bank added that demand continues to outstrip available capacity. It said whether further tightening is needed will depend on the extent to which housing and demand pressures show signs of moderating over the months ahead. But, the RBNZ said, it did not yet see any prospect of a policy easing in the foreseeable future
bruce.hextall@xfn.com blh
For more information and to contact AFX: www.afxnews.com and www.afxpress.com
Karin's Translation:
The people in New Zealand, happy with the price appreciation in their houses in recent times, have continued to spend (as opposed to saving) and the govt is still concerned about inflation. So they raised their overnight lending rate to 7.25%, which will hopefully slow down consumption and inflation.
Wednesday, December 7, 2005 10:16:15 PM http://www.afxpress.com
SYDNEY (AFX) - The Reserve Bank of New Zealand said it has raised its official cash rate 25 basis points to 7.25 pct. The central bank cited strong household spending, a buoyant housing market and persistence of inflationary pressures as reasons for the move. The rate is the highest in the industrialized world.
The increase had been widely anticipated and follows a 25 basis points rise in October. The central bank's governor, Allan Bollard, said the household sector is the main driver of continuing strong domestic demand, linked to a still buoyant household sector. RBNZ said, in a statement, increasing government spending and continued strong business investment are also boosting total demand. "The resulting excess demand, reflected in a growing current account deficit, is continuing to fuel inflation," it said.
The central bank said it remains concerned about the tightness of resources and the persistence of inflation pressures. It said the nation's exporters and other businesses exposed to the very high exchange rate are under considerable pressure and general business sector confidence is falling in the face of declining profit margins. The bank added that demand continues to outstrip available capacity. It said whether further tightening is needed will depend on the extent to which housing and demand pressures show signs of moderating over the months ahead. But, the RBNZ said, it did not yet see any prospect of a policy easing in the foreseeable future
bruce.hextall@xfn.com blh
For more information and to contact AFX: www.afxnews.com and www.afxpress.com
Karin's Translation:
The people in New Zealand, happy with the price appreciation in their houses in recent times, have continued to spend (as opposed to saving) and the govt is still concerned about inflation. So they raised their overnight lending rate to 7.25%, which will hopefully slow down consumption and inflation.
posted by Karin @ 9:41 AM
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