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Why the Reserve Bank cut the OCR today

Reserve Bank governor Graeme Wheeler explains why the Official Cash Rate was cut today.

Thursday, July 23rd 2015, 9:02AM

The Reserve Bank today reduced the Official Cash Rate (OCR) by 25 basis points to 3.0%.

Global economic growth remains moderate, with only a gradual pickup in activity forecast. Recent developments in China and Europe led to heightened uncertainty and increased financial market volatility. Particular uncertainty remains around the impact of the expected tightening in US monetary policy.

New Zealand’s economy is currently growing at an annual rate of around 2.5%, supported by low interest rates, construction activity, and high net immigration. However, the growth outlook is now softer than at the time of the June Statement. Rebuild activity in Canterbury appears to have peaked, and the world price for New Zealand’s dairy exports has fallen sharply.

Headline inflation is currently below the Bank’s 1 to 3% target range, due largely to previous strength in the New Zealand dollar and a large decline in world oil prices. Annual CPI inflation is expected to be close to the midpoint of the range in early 2016, due to recent exchange rate depreciation and as the decline in oil prices drops out of the annual figure. A key uncertainty is how quickly the exchange rate pass-through will occur.

House prices in Auckland continue to increase rapidly, but, outside Auckland, house price inflation generally remains low. Increased building activity is underway in the Auckland region, but it will take some time for the imbalances in the housing market to be corrected.

The New Zealand dollar has declined significantly since April and, along with lower interest rates, has led to an easing in monetary conditions. While the currency depreciation will provide support to the export and import competing sectors, further depreciation is necessary given the weakness in export commodity prices.

A reduction in the OCR is warranted by the softening in the economic outlook and low inflation. At this point, some further easing seems likely.

Tags: Mortgage Rates OCR

« Banks hit LVR brakesOCR cut to 3% »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.95 3.29
ANZ 4.44 3.10 3.50 3.84
ANZ Blueprint to Build 1.68 - - -
ANZ Special - 2.50 2.90 3.24
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.55 2.95 3.29
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.55 2.95 3.25
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 3.15 3.22 3.85
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 1.95 1.85 2.35 2.45
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.15 2.35 2.75
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 3.34 3.34 4.14
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 2.49 2.49 3.29
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.69 2.99 3.29
SBS Bank Special - 2.19 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.29 - -
The Co-operative Bank - Owner Occ 4.40 2.49 2.89 3.19
The Co-operative Bank - Standard 4.40 2.99 3.39 3.69
TSB Bank 5.34 3.30 3.69 4.04
TSB Special 4.54 2.50 2.89 3.24
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.59 3.15 3.49 3.89
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.89 3.29
Median 4.54 2.68 2.99 3.29

Last updated: 19 July 2021 9:09am

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