Floating mortgage rates unlikely to rise this year and may even fall
Reserve Bank governor Alan Bollard left his official cash rate (OCR) unchanged at its record low of 2.5%, as expected, expressed confidence inflation will remain benign and warned he will need to reassess "the outlook for monetary policy settings" if the currency remains strong without anything else changing.
Perversely, the New Zealand dollar jumped half a US cent to above 81.70 cents after Bollard's statements while wholesale interest rates fell two or three basis points.
Nick Tuffley, chief economist at ASB Bank, says the currency may have been capped ahead of the statement by expectations Bollard would have "some sharp words" about its strength.
"There wasn't any explicit threat to do anything about the currency," Tuffley says. There was also an absence of language such as the high currency being "detrimental," a word used frequently in the March monetary policy statement.
Click the button below to subscribe and will have free unlimited access for a limited time to full article and all other articles on the site.
You will also be able to comment on articles on Good Returns.
