OCR cut no surprise

Reserve Bank switches to a more neutral stance as it cuts interest rates.

Thursday, November 10th 2016, 9:35AM

by Miriam Bell

Reserve Bank governor Graeme Wheeler reduced the OCR by 25 basis points to a historic low of 1.75%, citing weak global inflation and upward pressure on the New Zealand dollar as reasons.

He also said that monetary policy will remain accommodative due to numerous uncertainties.

ASB chief economist Nick Tuffley said the OCR cut and the Reserve Bank’s accompanying statement were very much in line with their expectations.

“They said, essentially, that they have done enough at this stage. But that various uncertainties mean the risk of future action next year remains.

“This is in line with what we expected – that this is likely to be the last cut in this cycle.”

Stronger economic data recently means that today’s statement was pretty much anticipated by the market, he said.

BNZ chief economist Tony Alexander said that today’s OCR cut and Reserve Bank statement met expectations.

“It’s no surprise that they cut. And it is not surprising they indicated that, depending on developments, there remains a risk of further action.

“So they have retained an easing bias, which is not surprising at all.”

It would have been unrealistic to expect that the result of the US election would alter the Reserve Bank’s thinking at this point, Alexander added.

Westpac acting chief economist Michael Gordon said that, although the cut was delivered as expected, the Reserve Bank has now shifted to a much more neutral stance on future policy moves.

“The RBNZ’s projected OCR track settles at 1.7%, implying a small probability of a further easing, but with no strong commitment to doing so.

“We expect the OCR will remain on hold for an extended period.”

ANZ was still assessing the statement when approached for comment by mortgagerates.co.nz.

Tags: ASB BNZ OCR RBNZ Reserve Bank Westpac