Official Cash Rate (New Zealand)

Definition: This is the interest rate paid by New Zealand banks on the overnight money market.

Description: The Reserve Bank of New Zealand controls the official cash rate and uses it as a tool to keep inflation under control. The Reserve Bank accepts deposits at a rate 0.25% lower and lends at a rate 0.25% higher than the cash rate. Decisions regarding the OCR are made during meetings of the Reserve Bank's Board of Governors.

Influence: High interest rates lead to a decrease in lending and trigger an increase in consumer savings, causing a slowdown in economic growth. A rise in the OCR usually leads to an increase in capital flowing into New Zealand and provides a boost for the New Zealand dollar in the medium term. However, if the increase in rates is not accompanied by rapid economic growth, this may lead to economic stagnation and have a negative impact on the New Zealand dollar in the long run.

Market Impact: High

Released: Released eight times per year

Source: Reserve Bank of New Zealand