This 26 April 2012 our Reserve Bank left the OCR unchanged, but what does this mean for us? Our central bank in New Zealand has a target to keep stability in the general level of prices. The main tool they have is the overnight cash rate, this the rate which the Reserve bank will charge or give for money, without any limitations on amounts. This invariably has an impact on interest rates over all.
If the Reserve bank wants to slow things down or keep prices lower they can increase the interest rates, making it more appealing to save instead of spending. Statistics NZ has shown that price increase (CPI) has been 1.6% for the year up to March 2012. This is well within the target band, which is currently 1%-3%.
The Reserve Bank Governor Allan Bollard mentioned the expected push on inflation from building activity. But this April he also made a comment in regards to the fragile market sentiment globally and the strong NZ dollar. We are reading this to mean that if the pressure on the dollar is still there, with everything else remaining the same, the bank may need to change its hold and increase stance to more, hold and hold or hold and lower.
As interesting as it is to keep tabs on the comments and possible outcomes it is very hard to predict the future movements. Lets no forget the dramatic past drops in rates, a lot of which happened within months. Increases can also happen in a short space of time.
