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The OCR's road to recovery

Thursday, December 9th 2010, 9:35AM

Since March 1999, the Reserve Bank has used the Official Cash Rate (OCR) as its tool for controlling inflation.  The above graph shows the somewhat undulating road it has travelled over the past eleven years.

The journey started with a rate of 4.50% in March 99, then peak at 8.25% in July 2007 and remain at this rate for 11 months.  The rate then fell to its lowest point of 2.50% in April 2009.

Todays announcement to keep the OCR steady at 3.00% was expected with the Reserve Bank Governor Alan Bollard saying "While interest rates are likely to increase modestly over the next two years, for now it seems prudent to keep the OCR low until the recovery becomes more robust and underlying inflationary pressures show more obvious signs of increasing."

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