18 Jul 2012

Low inflation seen as time to cut OCR

7:41 am on 18 July 2012

A fall in inflation to its lowest level in more than a decade has prompted a call by BERL economist Ganesh Nana for the Official Cash Rate to be cut.

Annual inflation at the end of June was 1%, which is the bottom of the Reserve Bank's target range of 1% - 3%.

Mr Nana says breaches of the upper limit of the range are usually met with loud calls to raise interest rates to bring inflation to heel.

He says such low inflation is highlighting serious problems in the economy, which a cut in the OCR would help remedy.

He says it is time to cut the OCR to stimulate enough economic growth to lift inflation back within the target range.

However, BNZ economist Doug Steel says inflationary pressures are bubbling away, especially in the building industry, and now is not the time to cut the rate.

The OCR is currently 2.5%, which was set on 10 March 2011. Previously it had been 3% since 29 July 2010.