Bollard takes a bob-each-way to OCR review

Leaving the official cash rate (OCR) unchanged at 2.5%, as expected, Bollard said the domestic economy is stronger than expected but expressed concern about the "current fragility in global financial markets," especially the political uncertainty in the US over the government's debt ceiling.

If the global risks recede and the domestic economy continues to recover, the 50 basis point OCR cut could be reversed soon, Bollard said. However, he is also worried about the very high New Zealand dollar and if this persists "it is likely to reduce the need for further OCR increases in the short term."

Bollard also seems very relaxed about inflation, saying underlying inflation currently is below 2.5%.

Stephen Toplis at Bank of New Zealand says the central bank has sent an inappropriate message on inflation.