Akhir 04, 1432 H/March 09, 2011, SPA -- In a controversial move, New Zealand's central bank cut the benchmark interest rate from 3 to 2.5 per cent per cent in a scheduled review of monetary policy on Thursday, reported the dpa. Prime Minister John Key, a former currency trader, defied the convention of non-interference with the Reserve Bank's monetary policy last week by saying publicly that he expected it to cut the official cash rate (OCR) following last month's devastating earthquake in Christchurch. With indications that the economy was already in the grip of a double dip recession, some analysts have said the financial impact of the quake on the country's second largest city was comparable to that of 9/11 on the United States. Others argued that cutting the already low rate was unlikely to stimulate the economy much and could raise the 4-per-cent inflation rate already being stoked by rising food and petrol prices. Cutting the rate to equal the record low set nearly two years ago during the recession, Bollard said the earthquake had caused immense disruption to business activity and the national economy would be negatively impacted. He said signs that the economy was beginning to recover had been more than offset by the quake on February 22, and that and gross domestic product (GDP) growth was projected to be "quite weak" through the first half of the year. "This will gradually build up to a very large reconstruction programme by 2012 that will last for some years and contribute to a period of relatively strong activity." Bollard said the bank was acting pre-emptively in reducing the interest rate to lessen the economic impact of the earthquake and guard against the risk of the economic situation becoming especially severe.
