by Paul McBeth
The Reserve Bank has declined to change the Official Cash Rate, a key influence on floating and short-term fixed mortgage rates, at this morning's review.
The OCR remains at 6.5 per cent, where it's been since mid May, with Governor Don Brash saying that leaving it unchanged "seems the prudent thing to do right now" given the uncertainty about our economic outlook.
"Clearly the data on economic activity in a small economy such as ours tends to be 'noisy', and the Bank needs to steer through that noise as best it can," Brash said.
He said it now appeared that the economy might have contracted slightly in the June quarter and that growth in the September quarter might also be weak. "As a result, pressure on the economy's capacity seems likely to be less over the next few quarters than previously expected."
Commentators had been divided on the prospects of a rate change today, but most had tended to think - or hope - the RB would let well alone (see our recent OCR preview). However, they still predicted some heat yet in interest rates and at least one more hike in the OCR this year (next review dates are October 4 and December 6).
Today's review coincides with the release of the RB's August Monetary Policy Statement: click here to read this online.
Paul is a staff writer for Good Returns based in Wellington.
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