by The Landlord
While the housing market continues to cool, the labour market remains tight, domestic income growth is still strong, especially from dairy, and core inflationary pressures persist.
“Since the December MPS there has been ongoing turbulence in international financial markets and a deterioration in the outlook for the United States and European economies. We will be watching these developments closely, particularly their implications for the Asian and Australian economies and for world commodity prices.
“Despite this, the New Zealand economy is projected to keep growing reasonably well. Ongoing inflationary pressures are underpinned by an expansionary fiscal policy, and rising food and energy prices, which will be under further pressure with the Emissions Trading Scheme in a year’s time.
“On balance, the outlook for interest rates is little changed from the December MPS, but the level of uncertainty has increased. Although CPI inflation is expected to remain above 3% during 2008, we believe that the current level of the OCR remains consistent with future inflation outcomes of 1 to 3% on average over the medium term.”
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