OCR unchanged, floating rates stable
Floating mortgages are looking comfortable at current levels after the Reserve Bank decided to leave its interest rates unchanged.
Wednesday, September 29th 1999, 12:00AM
by Paul McBeth
Floating mortgages are looking comfortable at current levels after the Reserve Bank decided to leave its interest rates unchanged.
Today was the review date of the RB's Official Cash Rate (OCR) and, as expected, it's remained at 4.5 per cent. However, market-watchers have already switched their focus to the next review on November 17 - just ten days before the election - when the OCR may yet increase and drag floating rates with it.
What's clouding the picture is last week's shock announcement of economic shrinkage, as GDP figures dropped 0.3 per cent over the June quarter. The Reserve Bank was expecting growth of 0.5 per cent and most private sector predictions averaged a similar amount.
That means the jury's now out on whether the RB will boost the OCR in November, as it had signalled, or decide that the economy's too wobbly at the knees and leave it alone. The bank had said at its last review that lifting rates by the end of the year was "increasingly likely", as inflationary pressures were stronger than it had expected.
At the time, the RB's revised outlook was criticised by a number of economists who said it needed to build confidence in what was still a new regime. BNZ chief economist Tony Alexander called the change "astounding" and "a clear signal that the RB remains as volatile an implementer of monetary policy now as they have always been".
Following the rotten GDP figures, the bank's now been called on to leave the OCR alone rather than kill off any fledging economic growth. So holders of floating mortgages could be off the hook... for the meantime.
Earlier stories:Last OCR review
BNZ lifts interest rate predictions