Economists say rate rise 'understandable'

Infometrics senior economist Gareth Kiernan said he can understand Reserve Bank Governor Alan Bollard's move this morning to raise the official cash rate by a quarter of a per cent from 6.5 to 6.75 per cent.

"In terms of trying to keep inflation under control, there's been signs of a slowdown happening and they've been there for the past few months," Mr Kiernan told NZPA today.

"I guess they (the RB) have grown impatient with those and decided to try and bed them in a little more," he said.

He said the rate rise increase would take time to effect home owners, many of whom were on fixed rates.

"The pressures in the export sector are really going to intensify... especially with the dollar heading toward US75c."

Deutsche Bank said the rate rise was not a surprise as taking the heat out of the local economy was clearly the driver. It would have some effect on the highly competitive mortgage market.

"It (the OCR rise) has to have some implications but, I guess, another 25 (basis point rise) would really make it a lot tougher," an economist for the bank said.

- NZPA