KEY POINTS:
Reserve Bank governor Alan Bollard has given the clearest possible signal that he is more worried by the fact economic growth is virtually at a standstill than by demoralising effects of high - and rising - inflation in the short term.
In unusually explicit language for a central banker he says he is likely to cut the official cash rate "later this year."
That is despite the fact that inflation is now expected to peak at 4.7 per cent - a rate not seen since 1990 - in the September quarter this year.
Such a loud and clear easing signal is needed because of the long lags there are now between when the bank adjusts its interest rate and changes to the average mortgage rate people are paying. The latter will continue to rise as rates fixed before the global credit crunch roll out.
Today's move is intended to ensure the curve in the average or effective mortgage bends lower sooner than it otherwise would have.
The reason is that the bank's latest forecast embody a bleak outlook for households, under the combined effect of a 22 per cent fall in real house prices, a weakening housing market and high oil and food prices.
Household spending - around 60 per cent of the economy, is expected to go nowhere in real terms over the next three years.
