Despite the fact that around 60 per cent of economists recently polled by Bloomberg and Reuters believed Dr Bollard would keep interest rates steady at this morning's announcement, the steely-resolved Reserve Bank governor was determined to send kiwis a strong message about their "excessive, inflationary" spending habits.
The
Official Cash Rate (OCR) was raised this morning by 25 basis points to a new high of 7.75 per cent
The majority of economists had predicted that Dr Bollard may have waited until the next Monetary Policy Statement in June to deliver a body-blow to prospective home buyers and those in the export sector.
But the good doctor decided he couldn't wait.
Today's rate hike was the 11th in the current cycle since it began in December 2003. On the back of governor Bollard's comments, it may not be the last, although economists said Dr Bollard could afford to pause at the next review in June.
Dr Bollard refused to take questions on his decision.
It contained no hint as to the Reserve Bank's future bias, and looked to be directed more at the currency than anything else.
So how have economists reacted to today's announcement?
ANZ National Bank chief economist Cameron Bagrie told NZPA that today's statement was interesting for what it didn't say more than what it did say.
"They're on hold now, and the hurdle to a rate hike is reasonably high, given those fixed lending rates have moved up," he said.
"They're obviously very mindful of the high New Zealand dollar.
It's a policy of on hold for a very elongated period."
Others thought along similar lines.
"The tone of the statement was as expected. We still have a mild tightening bias but don't see the bank going again this year," Jason Wong, economist at First NZ Capital, told NZPA.
UBS economist Robin Clements agreed today's action and commentary was consistent from what the bank said in March, and the areas it was pointing to.
"They mentioned non-tradables and signs of re-acceleration. Given that and the data flow, a hike seems consistent with what they have laid out.
"It doesn't seem like there's a finger on the trigger for another. It has a feel of 'right, we've done something, and now we'll wait and see'", NZPA reported him as saying.
- additional reporting by nzpa
