Thursday, 26 July 2007

Hot NZ Dollar forces up Interest Rates

New Zealand Reserve Bank Governor, Dr Alan Bollard, has again raised the official cash rate this morning, in a bid to dampen inflation and to try to cool the hot kiwi dollar.

Bollard's raised the official cash rate (OCR) by a quarter of a percent, to 8.25%. It's the fourth increase this year, and comes as New Zealand banks call for a more "consensual approach" between the Governor and other groups.

The ANZ Bank has suggested a new "monetary policy committee" be formed, to ensure decisions aren't seen as the responsibility of just one person. The Government rejected the recommendation of a committee structure for the Reserve Bank in 2001.

Some analysts are critical of the recent rates rises, which appear to have done little to slow the climbing kiwi dollar. Exporters claim the strong currency is putting their businesses under serious strain.
The New Zealand dollar hit a new 22 year post-float high of US81c this week, after breaking through the psychological US80c mark on Monday night. That figure was written off as "idle speculation" just a few months ago, but some economists now say the kiwi dollar could even reach US$1, if the Greenback continues to weaken.

(Bad news for exporters I guess, but great news for jet-setting tourists like me, for my September trip to the United States! ;-)

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