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All eyes on interest rates for the next two years

Aside from the expected RBNZ 0.50% OCR drop on Wednesday, economists are expecting a thorough update of where it sees interest rates going over the next two years. [READ ON]

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OCR rises but Bollard surprisingly dovish

While Reserve Bank governor Alan Bollard raised interest rates this morning, as everyone expected, he surprised the market with his surprisingly dovish rhetoric.

Thursday, October 28th 2004, 10:54AM

by Jenny Ruth

Bollard raised the official cash rate (OCR), which directly affect floating mortgage rates, from 6.25% to 6.5%.

But he said that current monetary policy settings "are now doing enough to ensure price stability." Some economists had expected an outside chance that the OCR would go to 6.75% today and many had been thinking there was a very good chance of it going to that level in December.

The currency markets reacted immediately, pushing the New Zealand dollar down half a US cent to 68.90 US cents. The reaction in wholesale interest rate markets was more subdued with the 90-day bank bills little changed while the December 90-day bank bill futures slipped from implying the physical bills will be at 6.83% in December to 6.75% by then.

Craig Ebert, an economist at Bank of New Zealand, says that he now rates the chance of a rate hike in December at just 20%, down from 50% before today's move. "At the margin, it's a bit more dovish than we had expected," he says.

Bollard said that while the economy is still very strong and the economic data surprising on the upside, the previous OCR hikes this year have still to work their way through the economy and that the high New Zealand dollar will also help to cool activity. Changes in monetary policy generally take up to 18 months to affect an economy and Bollard has raised the OCR from 5% in January.

Nick Tuffley, an economist at Westpac, says Bollard's statement contrasts significantly with his last one in September when he was talking about their being very little headroom left and the likelihood of inflation above 3% for 18 months. Bollard is pledged to keep inflation between zero and 3% over the medium term.

Today's statement was surprisingly short. "It's more noteable for what's not in it that for what is," Tuffley says.

Anthony Byett, chief economist at ASB Bank, says the statement is still broadly in line with market expectations and doesn't rule out a further rate rise in December.

"It's non-commital. Any likely move becomes a day-to-day proposition now. We really just need to wait and see what evolves over the next few weeks."

The Reserve Bank's next monetary policy statement is due on December 9.

« OCR up to 6.50%Wizard and AMS sold for more than $A400 million »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 5.65 5.55 5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society ▼8.60 6.75 6.40 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 5.95 6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - 6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.49 6.49 6.49
TSB Special 7.89 5.69 5.69 5.69
Unity 7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.10 6.05 5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.02 5.79 5.69

Last updated: 20 November 2024 9:45am

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