Shutting door on rate rises raises an eyebrow

Monday 1 November 2004

Reserve Bank Governor Alan Bollard might have scored an own goal by being so explicit that he had finished raising interest rates, economists said yesterday.

By The Landlord

Because of the hawkish tone of his monetary policy statement only six weeks ago, Bollard had been expected to at least leave the door open to a further rate hike.

Instead he all but slammed it shut when announcing the official cash rate would be raised 25 basis points to 6.50 per cent.

The two reasons he gave were the strength of the dollar and confidence his recent interest-rate hikes would eventually work their way through the economy.

But the dollar fell after the announcement, ending the day six-tenths of a cent lower against the United States dollar and 1.25 cents lower against the Australian.

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