Mortgage rates will rise but economy won't cool - BNZ
Updated 3:20PM Thursday April 26, 2007
By Adam Bennett
The BNZ says the latest hike in the official cash rate will raise floating mortgage rates but is unlikely to slow down the economy.
Reserve Bank governor Alan Bollard delivered a further crushing blow to the fortunes of prospective home buyers and exporters when he raised the Official Cash Rate (OCR) this morning by 25 basis points to a new high of 7.75 per cent.
In announcing the raise, Bollard this morning cited inflationary pressure from the housing market, strong domestic demand and government spending.
The BNZ said that while the New Zealand dollar is exceptionally high by historical standards, farmers are getting good prices for exports and more tourists are visiting the country.
BNZ Chief Economist Tony Alexander said controlling the interest rate is the only tool at the Reserve Bank's disposal.
Green Party co-leader Russel Norman also today said the OCR was too blunt a tool and was exacerbating imbalances in the economy by driving up the New Zealand dollar.
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