RBNZ holds steady on OCR and outlook 

Source: ONE NewsReserve Bank of New Zealand

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The Reserve Bank has kept the official cash rate on hold at 2.5%, as widely expected.

The OCR has been at a historic low of 2.5% since April having steadily dropped from 8.25% during the middle of last year.

In his last monetary policy statement in September Reserve Bank governor Alan Bollard reiterated that the bank expected to keep the benchmark cash rate low until sometime in the second half of 2010.

He confirmed this outlook on Thursday. However, he did not say the bank would consider taking the rate lower as he had done previously.

"In contrast to current market pricing, we see no urgency to begin withdrawing monetary policy stimulus, and we expect to keep the OCR at the current level until the second half of 2010," Bollard said.

With firmer signs of economic recovery beginning to show both domestically and globally, there had been increasing talk in the market that Bollard would signal an earlier rise.

However, Bollard cited concerns over the high New Zealand dollar hampering an export-led recovery, and whether the current composition of growth could be sustained, as reasons to keep monetary policy support in place.

"Activity in New Zealand's trading partners continued to rebound during the September quarter and financial market sentiment has improved further. However, there remain significant vulnerabilities and challenges to be worked through in many economies," Bollard said.

Currently, there are no inflationary pressures with New Zealand's inflation rate of 1.7% well within the Reserve Bank's target range of 1-3%.

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