Bollard's barrel is nearly empty

Reserve Bank Governor Alan Bollard cut the official cash rate for the sixth time in eight months yesterday but signalled that there is not much more where that came from.

He has now cut the OCR from 8.25 per cent to 3 per cent. The bank's forecast imply it will go to 2.5 per cent and when he appeared before Parliament's finance and expenditure select committee yesterday he indicated he would take a lot of persuading to go below 2 per cent.

Lower rates hurt depositors. "I am already getting a lot of letters from older people about that," he said.

Another reason is that New Zealand as a small and highly indebted country needs higher rates to compete for funding in offshore markets.

In any case, borrowers have yet to feel the full benefits of what Dr Bollard has done already.

To read the full NZ Herald article click here

Posted: 13 Mar 2009

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