The increase in the Official Cash Rate by 25 basis points as announced on Thursday morning is going to further tighten the money supply in the region's economy says IRG BOP investment adviser Jonathon York.
'Mortgages have got to be paid, that's going to result in less being available for discretionary spending and retailers will feel the pinch again,” says Jonathan.

IRG BOP investment adviser Jonathan York is anticipating a tight time for households in the coming months following an increase in the OCR by 25 basis points.

'The GST increase in October will take more cash off the table. It's pretty tough out there at the moment.”
There are more people on floating mortgages than fixed and they are going to be hit pretty hard, says Jonathan.
Even at three per cent, the OCR is still artificially low, says Jonathan, who is also picking there will be another rise in the rate to bring it to 3.25 per cent by the end of the year – with a further increase next year.
'While the outlook for economic growth has softened somewhat, it is still appropriate to continue to reduce the extraordinary level of support implemented during the 2008/09 recession,” says Reserve Bank Governor Alan Bollard.
'The world economy continues its fragile recovery. Trading partner growth has turned out stronger than we predicted, however, future prospects for growth have deteriorated. While still at high levels, our commodity prices have moderated.”

In New Zealand, Alan says the economy is tight:
• Domestic demand remains subdued.
• Households are cautious, with retail spending growing only modestly.
• Housing turnover remains in decline and household credit growth weak.
• A recent slowing in net immigration will act to further dampen consumer spending.
• Business investment remains very low, with corporate lending continuing to be subdued.
• The appreciation of the New Zealand dollar in recent weeks is inconsistent with the softening in New Zealand's economic outlook and moderation in export commodity prices.

'Overall, we continue to predict respectable near-term GDP growth, with manufacturing confidence remaining elevated and forestry exports continuing to expand. An eventual recovery in business investment will assist growth over the medium term.
'Annual CPI inflation has been near two per cent for the past five quarters. As the economy grows, inflationary pressures are expected to pick up.
'Given this, some further removal of monetary policy stimulus is appropriate at this stage. Even after today's move, the level of the OCR is still very supportive of economic activity. The pace and extent of further OCR increases is likely to be more moderate than was projected in the June Statement. Our policy assessment will be continually reviewed in light of economic and financial market developments.
'The coming increase in the rate of GST and other government-related price changes are likely to temporarily push annual CPI inflation above three per cent.
'The Bank does not expect this price spike to have a lasting impact on inflation. 'However, the price and wage setting behaviour of firms and households will be monitored for evidence of any increase in inflation expectations.”