KEY POINTS:
Reserve Bank Governor Alan Bollard said today he is waiting to see if his monetary policy will do its work.
He made the comment following criticism from some economists that he should have raised the Official Cash Rate (OCR) when he reviewed it yesterday.
Instead, Dr Bollard left the rate unchanged at 7.25 per cent, where it has been since December 2005 through nine reviews.
In the two years before that, the Reserve Bank had lifted the rate in incremental steps from 5 per cent.
Yesterday Dr Bollard said the near term inflation outlook was relatively benign, but the bank remained concerned about the risk of medium term inflation.
Today he told National Radio that having lifted rates, the Reserve Bank had "just sat with them up there to see if we can get this monetary policy to do its work".
The Reserve Bank was trying to run a fairly calm policy, rather than one where interest rates were changing all the time, Dr Bollard said.
The focus was on medium term inflation, while pressure on the New Zealand dollar, keeping it at high levels, "has been in the forefront of our minds".
That pressure was hurting the traded sector, "but New Zealanders are still going out buying houses and committing funds they don't have, as if this isn't a problem at all. Of course it is a real problem".
Dr Bollard also noted he received "a huge amount of free advice".
"Some of that's disinterested. A certain amount of it is interested, and depends on where particular financial institutions have got particular positions," he said.
Growing numbers of economists are picking an interest rate hike in March, when the Reserve Bank next reviews the OCR.
- NZPA
