Making sense of the OCR

Professor Christoph Schumacher
National Business Review
28 November, 2022

On Wednesday, the Reserve Bank increased the Official Cash Rate (OCR) by 0.75 percentage points (pp) to 4.25%. This isn’t surprising given that inflation has reached a 30-year high of 7.2%, but is it too little too late? 

Think of the OCR as the cost of money. So, if prices increase too quickly, the RBNZ increases the OCR to keep a lid on inflation to ensure the economy does not overheat. But why then, did the OCR remain at a low of 0.25% in early 2021 when inflation started to rise? 

Read here

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