Bollard lifts OCR, predicts more moderate pace of increases

"While the outlook for economic growth has softened somewhat, it is still appropriate to continue to reduce the extraordinary level of support implemented during the 2008/09 recession," Bollard said in Wellington today.

"The pace and extent of further OCR increases is likely to be more moderate than was projected in the June statement."

Recent data and confidence measures point to an economy that has slowed to a more tepid pace of growth, easing pressure on the central bank to embark on an aggressive tightening. Business confidence weakened for a third straight month, according to the National Bank Business Outlook, with firms seeing smaller profits and reducing plans to hire more workers.

Demand in the housing market has remained weak, net migration is waning and consumers are less inclined to spend as they reduce leverage.