Nick Tuffley's interest rate update

ASB Bank is predicting that the Reserve Bank will make two more cuts to the Official Cash Rate this year, bringing it down from 2.25% to 1.75%.low and stable for some time.

Tuffley says we are likely to see a reasonable majority of those cash rate comes through to floating rates, however the scope for more cuts to shorter-term fixed home loan rates is a little bit more limited.

The outlook for interest rates is rather benign and there is likely to be "quite a lot of stability for a long time."

This environment is only likely to change with one good shock and one bad shock. A good shock would be that the New Zealand economy picks up and inflation starts to rise, which would require a tightening response from the Reserve Bank.