12 Sep 2011

OCR expected to remain on hold

7:20 am on 12 September 2011

Deteriorating global growth and ongoing market turmoil are likely to stay the Reserve Bank's hand for a while longer when it comes to raising interest rates.

The central bank releases its monetary policy statement this week and most economists expect it to leave the cost of borrowing at 2.5%, where it has been since March.

In July's OCR review, the Reserve Bank indicated there was little need for it to keep its 50 basis point cut but ASB chief economist Nick Tuffley says the international turmoil in recent weeks will have changed that position.

He says that while New Zealand has to be wary of the impact of stalling US and Europe growth and of the small risk of a financial crisis blowing up, the domestic recovery has been looking quite good.

Mr Tuffley is expecting the Reserve Bank to raise rates in December.

The Reserve Bank's monetary policy statement is released at 9am on Thursday.