OCR increase expectations pushed out to September
Prior to Christmas, both Westpac and ASB were picking a June OCR increase of 25 basis points to 3.25% alongside other banks.
ASB economist Nick Tuffley says in ASB Business Weekly that its change of view comes as ASB believes convincing signs of recovery in the economy won't be seen in three important areas till September - in a strengthening housing market, further recovery in business sentiment and a sustained recovery in business credit.
Supporting ASB's view is the December Monetary Policy Statement where the Reserve Bank said it wants to be more confident of a recovery before lifting rates again, particularly given the fears of prematurely lifting rates and choking off the fragile recovery.
Tuffley says with recent activity data generally disappointing and inflation indicators suggesting inflation pressures are subdued for now, there looks to be little urgency for the Reserve Bank to lift the OCR.
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