OCR reduced to 3.5%

Reserve Bank Governor Alan Bollard commented that “the news coming from our trading partners is very negative. The global economy is now in recession and the outlook for international growth has been marked down considerably since our December Monetary Policy Statement.

“Globally, there has been considerable policy stimulus put in place and we expect this to help bring about a recovery in growth over time. However, there remains huge uncertainty about the timing and strength of a recovery.

“The extent of the decline in global growth prospects and the ongoing uncertainty has played a large part in today’s decision. We now expect the impact on New Zealand of these developments to be greater than we did in December, as a result of a more negative outlook for the terms of trade and exports, and tighter credit conditions.

“Inflation pressures are abating. We have confidence that annual inflation will be comfortably inside the target band of 1 to 3% over the medium term.