KEY POINTS:
This time governor Alan Bollard has not pulled his punches.
In following up the official cash rate increases in March and April with another today he is looking for a king hit on inflation.
In the past he has been willing _ too willing in the view of his critics _ to give the economy the benefit of the doubt. Not this time.
What seems to have tipped the balance is recent surge in dairy prices and rural incomes, coming at a time when there is little spare capacity in the economy.
But it is a brave call to raise the OCR when the kiwi dollar is already at post-float highs against the US dollar and there are daily reports of manufacturers shedding jobs and moving production offhsore.
The bank argues that a sustained fall in the exchange rate will depend on its ability to combat domestic inflation.
But in the near term it admits high interest rates and high commodity prices -- which it expects to persist -- will keep the dollar high.
The bank's concerns about the strength of the housing market continue.
Nearly a third of fixed-rate mortgages (or a quarter of all mortgage debt) comes up for pricing over the next 12 months. Those borrowers face increases of up to a full percentage point if the mortgage rates currently on offer persist.
Today's move is intended to ensure they do.
