Bollard keeps OCR steady but flags further cuts

Bollard reiterated that he expects to keep his official cash rate "at or below the current level through until the latter part of 2010."

His comments sent the currency sliding three-quarters of a US cent to 65 cents while wholesale interest rates sank between five and 10 basis points. His OCR remains unchanged at 2.5%.

"The big concern is the New Zealand dollar," says Nick Tuffley, chief economist at ASB Bank. "The Reserve Bank is stressing that monetary conditions are certainly not going the way it desires."

Dairy farmer payouts are likely to remain subdued over the next couple of years and the outlook for tourism isn't strong either. Tuffley is expecting Bollard will cut the OCR again in September or October although "that will depend on whether the currency remains pretty elevated.