RBNZ raises OCR 25 basis points

Reserve Bank Governor Alan Bollard said "Today's OCR increase reflects a continued buoyant economy that is placing considerable strain on resource capacity and hence leading to inflation pressures. This broad assessment and policy decision remains consistent with our June Monetary Policy Statement.

"Overall, the domestic economy remains strong. Labour markets remain tight, and productive resources are stretched. However, as we have projected for some time now, there are signs of a slowing in some domestic sectors.

"There has been positive news on the export front. Commodity prices have been rising and export incomes are improving. This is despite the continued strength and volatility in the New Zealand dollar.

"It appears that current economic strength may be maintained for longer than we anticipated in June and it could add to price pressures. Further tightening of monetary policy looks likely to be necessary."

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