RB says rate hike may be last for some time

Thursday 28 October 2004

Reserve Bank governor Alan Bollard today hiked interest rates for the sixth time this year but jolted financial markets with the surprise announcement that the tightening phase was over.

By The Landlord

He raised the cash rate to 6.50 per cent from 6.25 per cent, which is likely to quickly flow through to floating mortgage interest rates.

Dr Bollard said the economy was still performing strongly and had continued to provide positive surprises.

Resources would remain stretched for some time yet and inflation pressures remained.

"However, the recent monetary policy tightenings still have to work their way through the economy, and the high exchange rate will also have its effect," Dr Bollard said.

"Given this, we believe that the current settings of monetary policy are now doing enough to ensure price stability as defined in the Reserve Bank's Policy Targets Agreement," he said in a short statement.

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