OCR rise likely to raise mortgage rates

Tuesday 3 February 2004

Against expectations, Reserve Bank governor Alan Bollard raised his official cash rate (OCR) from 5% to 5.25%, citing stronger than expected household spending and activity in the construction and housing market.

By The Landlord

"By raising interest rates now, we hope to avoid having to increase interest rates more aggressively later on," Bollard said on announcing the increase.

Bank of New Zealand economists had seen today’s decision as a close call. Senior markets economist Craig Ebert says the central bank’s focus is very much on the economy.

"It’s so strong and operating pretty much above its long-term sustainable level," Ebert says, noting that unemployment is very low and tracking lower and that the housing market is "going ballistic."

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