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CHRISTCHURCH - Don Brash has rejected the view that the Reserve Bank was "out of its cotton-pickin' mind" to hike interest rates this month.
However, the bank's governor said yesterday that he was embarrassed by the timing of the bank's quarter percentage-point rate-rise, just hours before Statistics New Zealand data showed inflation in the December quarter was only 0.2 per cent.
Dr Brash maintained his previously stated view, that even had he known what the figure was, he would still have raised the official cash rate to 5.25 per cent from 5 per cent.
The bank was responding to pressures on the economy and expected future inflation.
The bank had forecast in November that inflation would rise 0.9 per cent, a far cry from the actual figure.
Dr Brash said the bank wanted the economy to grow as fast as possible without generating inflation.
Because of the time lag between action and its effect on economic conditions, the bank had to look a long way ahead and experience had taught him to act sooner rather than later.
- NZPA
Timing wrong but interest rise right
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