RBNZ central bank keeps key interest rate unchanged at 7.25 pct

The Reserve Bank of New Zealand said it has kept its official rate unchanged at 7.25 pct but warned it is less confident that no further tightening will be needed because of strong inflationary pressures.
The decision had been expected by the market.
The rate has remained at 7.25 pct since January, the highest rate among industrialized countries and also the highest level since it was introduced in March 1999.
RBNZ governor Alan Bollard said there have been clear signs of easing activity and a rebalancing of demand from the domestic to the external sector since late last year.
But Bollard said economic activity appears to have been stronger than expected through the first half of 2006, with the expansion in employment particularly surprising.
"Net exports and government spending have contributed to the buoyancy in activity, while the easing in household consumption has been more moderate than projected," he said in a statement.
Bollard said while the housing market has slowed, it continues to exhibit momentum.
Although further dampening effects on demand from high oil prices and higher effective mortgage rates over the period ahead are expected, he said the central bank sees more inflationary pressure than in earlier reviews.
The annual inflation rate in the second quarter was a higher-than-expected 4 pct, above the central bank's 1-3 pct target band for the fourth consecutive quarter.
The RBNZ next reviews the official cash rate in its monetary policy statement on Oct 26.