Economists predict OCR cut
Economists are unanimously expecting the official cash rate to be cut next week.
Friday, September 4th 2015, 3:30PM
by Susan Edmunds
The Reserve Bank will announce its decision on Thursday.
It comes amid an increase in competition in the mortgage market.
BNZ announced a new one-year rate today of 4.35%, which is the lowest advertised rate on record.
Kiwibank said it had plans to respond with “marketing initiatives” next week.
All of the economists surveyed by Mortgagerates.co.nz expected an interest rate cut of 25bps, which would take the OCR to 2.75%.
ASB chief economist Nick Tuffley said he then expected the bank to signal a further move was likely, to 2.5%.
Westpac chief economist Dominick Stephens has previously forecast an OCR of 2%.
He said he was comfortable with the idea that, sooner or later, the Reserve Bank would have to cross the 2.5% threshold.
“New Zealand is entering a significant economic slowdown at a time when core inflation is already well below the RBNZ’s target, meaning monetary policy has a great deal of work to do,” he said.
“We do not believe that the falling exchange rate will generate enough inflation to meet the RBNZ’s medium-term target. We are forecasting consecutive 25bps OCR cuts between September and January.
"This would take the OCR to a new all-time low of 2.0%. But at this stage the RBNZ does not share our view, and that creates a risk that the OCR takes longer to get to 2%.”
Donal Curtin, of Economics New Zealand, said it would be interesting to see how the Reserve Bank navigated the balance between managing too-low inflation and a hot housing market in Auckland.
“I wouldn’t be surprised if they pointed out that there is more to the economy than dairy prices.”
Robin Clements, of UBS, said the focus of the OCR announcement next week would be on the outlook for inflation.
“If the forecast is that inflation will be back near mid-point by first half of 2016, then there is unlikely to be further cuts.
"RBNZ may leave the door open, saying 'some further easing may be required' depending upon data-flow."
ANZ expects the Reserve Bank to completely unwind all of last year’s rate hikes.
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