Alan Bollard

Wellington, Jan 28 NZPA - Reserve Bank governor Alan Bollard, as widely predicted, has left the official cash rate (OCR) at 2.5 percent today.

In announcing the unchanged rate this morning, Dr Bollard said the country's recovering economy was tracking along last month's projection and it would likely be the middle of the year before the rate was changed.

His statement today was almost identical to last month's OCR announcement.

However, in a slight change of wording he said the global economy continued to recover, as opposed to rebound, from the global financial crisis.

"Economic growth is most apparent in China, Australia and emerging Asia, however sustained growth throughout our trading partners is not assured, with many still facing impaired financial sectors and overall activity still reliant on policy support."

Similarly the New Zealand economy continued to recover but business spending was weak and household spending was cautious, he said.

Annual inflation of 2 percent at the end of December was within the bank's target of 1 to 3 percent and was expected to stay within that band over the medium term.

"The economy is being assisted by both monetary and fiscal policy support as growth becomes self-sustaining, fiscal consolidation would help reduce the work that monetary policy might otherwise need to do.

"If the economy continues to recover in line with our December predictions we would expect to begin removing policy stimulus around the middle of 2010."

Dr Bollard is expected to expand further on the bank's view on the economy when he speaks at a Canterbury Chamber of Commerce function in Christchurch tomorrow.