OCR review October 2007
Posted October 25, 2007on:
The OCR was left unchanged at 8.25%.
It seems that the RBNZ took a relatively neutral tone, stating that it was happy that without any external shocks the current rate should be sufficient to keep inflation in the target band of 1-3%.
However, looking at the set of external shocks the Bank provided seems to indicate that there is still some prospect of rate increases in the near future. Specifically, the Bank indicated that any increase in government spending would be taken as an upward shock. As we are entering an election year where the parties will base policy on the fundamentals of lollynomics rather than fiscal restraint, the balance of probabilities seems to suggest further hikes may be on there way.