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Business Weekly Economic Report
RBNZ to acknowledge better environment
Tuesday, 27 October 2009
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It is a short week, but potentially a significant one for monetary policy. Although the RBNZ will keep the OCR on hold, it is increasingly likely it will distance itself from its expectation it will keep the OCR “at or below the current level through until the latter part of 2010”.
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The economic outlook has improved considerably over the 6 weeks following the September MPS. The sheer volume of stronger than expected developments will see RBNZ reconsider both the economic outlook and the appropriateness of an OCR at 2.5%.
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We expect initial rate hikes to be aggressive (50 basis point steps) to promptly lift the cash rate off emergency settings. We envisage it would still take a year from April to get the OCR to a level consistent with interest rates having a neutral impact on the economy.
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Report Prepared by:
Jane Turner
ASB Economist
Phone: +64 9 374 8185
Fax: +64 9 302 0992
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