The Reserve Bank of New Zealand’s Governor Alan Bollard has warned that further loosening of moentary policy is contingent upon all economic sectors reacting to reduced demand and not increasing inflationary pressure.
Bollard has stated that New Zealand’s economy will be aided in its recovery by easing monetary policy, but that such an action would only be possible if inflationary pressures did not re-emerge.
The governor also warned against the risk of considering inflation to be yesterday’s problem, citing the September CPI figure of 5.1%, the highest since 1990.
Globally, commodity prices have been falling as consumer demand across the world has declined, and Bollard has called for further price cuts to follow on from this.
The Official Cash Rate has also fallen sharply, and has been reduced by 325 basis points since July.
Although banks have reduced their own rates, they do not match the official fall in interest rates.
Governor Bollard has called on the electricity firms not to keep hiking rates, for food, petrol and transport companies to reduce prices and for the banks to pass on cuts made by the Reserve Bank.
Source : Here
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