Interest Rate Cut is Too Modest

The Council of Trade Unions says today's 0.25 per cent cut in the official cash rate is too modest, and there was an opportunity for a more substantial movement."There is only a tiny risk that a 0.5 per cent cut would threaten the top of the inflation band in the future," CTU economist Peter Conway said today. "But there is a much bigger risk that a 0.25 per cent cut is too small to take the pressure off the NZ dollar, and give a boost to business confidence at a time that the economy is slowing."

The CTU is concerned that unnecessarily high interest rates will have a flow-on effect that will result in job losses.

Peter Conway said that the recent fall in annual CPI to 1.5 per cent emphasised that there is not a problem with inflation, and gave room for a more significant cut in interest rates.