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The Reserve Bank of New Zealand (RBNZ) said it has left its official cash rate unchanged at 5.25 pct, although cautioned that it will be watching economic indicators closely to determine if further rate rises are required. Speaking at the release of the RBNZ's March Monetary Policy Statement, Governor Alan Bollard said New Zealand has continued to enjoy a period of sustained economic growth over recent years. "Partly related to this, inflation pressures have been increasing in a number of domestic industries, including housing and construction," said said, adding it was for that reason the Bank raised the rates in January. "Meanwhile, the overall CPI inflation rate has so far been offset by weak imported inflation due to the rising New Zealand dollar exchange rate," he said. He noted that the bank has in the past projected a slowing in growth which would ease capacity and inflation pressures. "This projected growth slowdown is due mainly to the lagged effects of the high New Zealand dollar and an expected slowdown in population growth," he said. "With tentative signs becoming more evident in recent weeks, it remains our view that this projected growth slowdown will occur and eventually will reduce the accumulated inflation pressures," Bollard said. However, he noted New Zealand's latest activity indicators remain quite robust. "This implies that, in the short-term, there are ongoing risks that the bottlenecks in the economy persist for some time yet," he said, adding any persistence in current inflation pressures could see actual inflation nearing the top of the Bank's target range, raising policy risks. "With this uncertainty, we judge it as appropriate at this stage to wait and watch the data, to see whether a further small increase in interest rates will be required this year," he said.
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