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Bollard likely to hold interest rates steady

Delays to Canterbury's rebuild, diminishing inflation pressures and the strength of the New Zealand dollar mean Reserve Bank governor Alan Bollard will probably keep interest rates steady this week and for much, if not all, of this year.

Monday, March 5th 2012, 6:18AM 1 Comment

Of the 13 economists surveyed by www.mortagerates.co.nz, all expect no change to Bollard's official cash rate (OCR) on Thursday, currently at a record low of 2.5%.

 

While divided on how soon that will change, all are expecting the OCR will eventually rise with four expecting that will come in September. Five are picking December and the remaining four March next year.

Darren Gibbs at Deutsche Bank, who is officially still opting for a September hike, says "it's not going to be sooner than September." Financial markets have priced in only half a chance of a hike in December and don't have a full 25 basis point rise priced in until early next year, Gibbs says.

The annual rate of inflation dropped to 1.8% in the December quarter from 4.6% in the September quarter as 2010's GST increase dropped out of the equation.

Chris Green at First NZ Capital says the strengthening New Zealand dollar is likely to become an increasingly difficult issue for the central bank to manage, making Bollard loath to raise the OCR for fear of driving the currency still higher.

That's especially the case in a climate in which other central banks around the world are still running exceptionally easy interest rate regimes, Green says.

In December, the Reserve Bank was predicting the trade-weighted index of the New Zealand dollar would average 67 points in the March quarter but its own data showed it just below 74 points last week.

"More people now think it (the currency) will hold up at these levels. To me, that's a major development," Green says. He doesn't expect an OCR hike until next year.

Peter Cavanaugh at Bancorp Treasury Services, who is also forecasting the OCR will remain where it is until March next year, says it's clear the Christchurch rebuild will start later than expected and will likely be slower while the high currency will put pressure on the export sector.

As well, recent soft domestic data "gives the Reserve Bank every reason to sit on its hands," Cavanaugh says.

« ASB's mortgage book shrinks for a seventh successive quarterTime to fix: Westpac »

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Comments from our readers

On 5 March 2012 at 1:43 pm ninerzero said:
It is like a lottery. Given three choices
thirteen economists, who supposedly have as good an insight as to anyone on the economic outlook for our Country, come up with September, December 2012 and March 2013 being the BIG MOMENT. Wow----
I'm impressed.
Commenting is closed

 

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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 ▲7.75 ▲6.65 ▲6.35 ▲5.99
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 6.10 6.09 5.69

Last updated: 20 November 2024 9:45am

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