Official Cash Rate up 25 points

Today, the Reserve Bank Governor, Graeme Wheeler, raised the OCR by 25 points to 3.5%. This is the fourth increase this year. The increases should help to keep inflation at about 2%. That is the aim of the Reserve Bank.

Mr Wheeler said that the New Zealand economy was expected to grow by 3.7% this year. This was partly because of the construction industry in Auckland and Christchurch. Housing shortages caused by increased migration to Auckland and by the earthquakes in Christchurch have led to a busy construction industry. House prices in those cities have risen 18% in the last two years but since June, there has not been much change.

An increase in the OCR will mean higher floating mortgage prices, possibly up to 6.5%.

Mr Wheeler thought that the Kiwi dollar was too high. Today it dropped by 1 cent against the US dollar and the Australian dollar. Dairy and forestry prices are down and could affect the New Zealand economy.

Listen to March 13 2014, June 13 2013 and September 13 2012 to find out more about the OCR.

September 11 2008 explains the OCR and October 22 2008 explains inflation.

Vocabulary

• inflation – continual rise in prices
• mortgage – bank loan to buy a house
• forestry – logs or timber






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