10 Oct 2008

No 'urgent' need for cuts in NZ interest rates

3:15 pm on 10 October 2008

Economists say there is no urgent need for a cut in interest rates in New Zealand by the Reserve Bank.

The US Federal Reserve, the European Central Bank, the Bank of England and central banks in China, Sweden, Switzerland and Canada on Wednesday cut their rates on Wednesday.

South Korea and Taiwan also cut their interest rates on Thursday.

The Reserve Bank of Australia cut its rate by a full percentage point from 7% to 6% on Tuesday. So far, New Zealand's central bank has not followed suit.

The Reserve Bank indicated on Thursday it would wait until its next review on 23 October before considering interest rate levels.

National Party leader John Key on Thursday called on Reserve Bank Governor Alan Bollard to cut interest rates by at least half a percent sooner rather than later.

However, BERL economist Ganesh Nana told Morning Report on Friday there was no urgent need for a cut in interest rates.

Lincoln University economics Professor Paul Dalziel also said the Reserve Bank does not need to intervene before the next scheduled interest rate announcement.

The Official Cash Rate is currently 7.5% after being lowered by half a percentage point on 8 September.

The Reserve Bank previously reduced the rate from 8.25% to 8% on 24 July. It was the first cut since July 2003.