1 Sep 2010

Reserve Bank expected to hold interest rate

9:31 am on 1 September 2010

National Bank chief economist Cameron Bagrie says the continuing decline in business confidence will add pressure on the Reserve Bank to keep interest rates on hold next month.

The National Bank's monthly survey of business sentiment found optimists still outnumber pessimists, but the number of respondents who expect business conditions to improve over the next year fell 12 percentage points to a net 16%.

Confidence has fallen 34 points since peaking in February.

Company prospects, profit expectations and hiring intentions all eased.

Mr Bagrie says the recovery is likely to remain patchy over the coming months, and he thinks this will prompt the Reserve Bank to hold the official Cash Rate at 3%.

However, he says it's encouraging that export intentions bucked the downward trend, rising three points to a net 31% of respondents who now expect to export more in the coming year.