Call to halt further rises in the OCR

The Reserve Bank has been investigating the potential for other policy tools to help support its traditional official cash rate instrument in monetary policy, and will continue to look, Reserve Bank governor Alan Bollard says.

Releasing the Reserve Bank's statement of intent for 2010 to 2013, Dr Bollard acknowledged there was a lively debate in this country about the role of monetary policy in managing financial misalignment.

"For our part, we are confident that medium-term price stability is the right objective for monetary policy," he said.

However, Myles Wealth Management principal Craig Myles is calling for Dr Bollard to halt further rises in the official cash rate, saying that the "fragile recovery" is being put at risk by rising interest rates.

"I agree with the medium-term goal of price stability but we are coming out of the most extreme financial occurrence since the Great Depression.

"The Reserve Bank is running the risk of going too soon, extinguishing the recovery and leaving us bouncing along the bottom."

Since the OCR was moved up to 2.75% last month, business confidence had sagged, lending remained constrained and capacity was down, Mr Myles said.

International financial markets had reacted badly to news out of the G20 conference and the bad economic data from the United States.

Of more concern were the indications from the Reserve Bank that the OCR would continue to move up by 0.25% every six weeks or so, he said.

"The Reserve Bank wants to react to the slightest hint of inflation rather than allowing the recovery to bed in. It's just too soon," Mr Myles said.

On the economy, Dr Bollard said New Zealand had emerged from its recession, benefiting from stronger growth in its major trading partners in China, Australia and emerging Asia.