9.20 am
Reserve Bank Governor Don Brash has cut the Official Cash Rate from 6.25 per cent to 6 per cent, but in doing so he indicated that there were strong grounds for being cautious about further cuts.
"The main reason for cutting the OCR again is slowing growth in New Zealand's
main trading partners," Dr Brash said.
"This slowdown in global growth will have an adverse impact on demand for our exports, and is likely to reduce inflationary pressures in New Zealand.
"However, world prices for our commodities remain robust, and the exchange rate has fallen back since March. These unexpected developments, if they persist, could take much of the disinflationary sting out of weakening global demand.
Dr Brash said significant parts of the economy are operating near capacity and the labour market is relatively tight.
"It is for these reasons that we are only cautiously moving the OCR in the same direction as official interest rates in other countries. We will be assessing the emerging data carefully and will next review the OCR at the May Monetary Policy Statement to be released on 16 May."
