Reserve Bank Governor Alan Bollard surprised nobody today when he left the Official Cash Rate (OCR) unchanged in the December quarter Monetary Policy Statement.
Monday, December 13th 2004, 1:25AM
by The Landlord
But Dr Bollard sided more towards Scrooge than Father Christmas in his outlook for interest rates.
Instead of a pattern of gradual rate relief starting next year, Dr Bollard stressed a further rate hike could not be ruled out.
This is despite the bank no longer expecting inflation to creep outside the 1-3 per cent target band - as had been forecast in September - and an economic slowdown being almost assured next year.
The bank is projecting the economy will expand by an impressive 5.2 per cent in calendar 2004 - that is much stronger than the 4.65 per cent the bank forecast in September.
"The tightening in monetary policy over the past year currently looks sufficient to keep medium-term inflation pressures in check," Dr Bollard said.
But with inflation expected to remain near the top of the target band there was "little headroom" to absorb further inflation pressures.
