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No surprises in Reserve Bank's move

Little surprise followed the Reserve Bank’s OCR cut this morning - and further cuts are now generally expected to come this year.

Thursday, July 23rd 2015, 11:05AM

by Miriam Bell

In a move that was widely forecast, the Reserve Bank cut the OCR by 25 basis points to 3.0% this morning.   

Reserve Bank Governor Graeme Wheeler said the reduction was warranted by the softening in the country’s economic outlook and low inflation.

He added that further easing seemed likely.

Economists were not surprised by the news, but were interested in the change in language   in the RBNZ’s statement.

There was a clear bias to downwards easing in the statement which signals further cuts are on the way, according to ASB chief economist Nick Tuffley.

He said that, in a nutshell, the decline in dairy prices and soft inflation have changed the RBNZ’s outlook for the economy.

“The economy needs more stimulation. While the New Zealand dollar has fallen of late, further decline is needed. But the RBNZ’s language does reflect the fact the exchange rate is no longer unsustainably high.”

He sees the RBNZ cutting the OCR again in September and then in October, by 25 basis points each time.

The RBNZ’s line that “further easing seems likely” did indicate further cuts are to come, agreed NZIER senior economist Christina Leung.

She said there has been increasing speculation that there will be a 50 basis point cut at some point, so that the OCR goes as low as 2%.

But the announcement today suggested to her that the RBNZ doesn’t have the appetite to go quite that far.

“The country’s economic outlook is not as weak as has been said,” she continued.

For example, the New Zealand dollar’s sharp fall has given a boost to [non-dairy] export sectors and to services like tourism.

Further, there is solid construction activity in Auckland and Christchurch, while the decline in the New Zealand dollar should provide a bit of a buffer for falling dairy prices.

Leung said NZIER expected a 25 basis point cut in September and possibly another in October - although that didn’t seem warranted as yet.

Both Tuffley and Leung noted that the New Zealand dollar and New Zealand wholesale interest rates both moved slightly higher after the RBNZ’s announcement.

However, they both said this was largely due to the fact the market had priced in the small chance of a more aggressive 50 basis point cut.

As this did not happen, the market was unwinding that speculative position.

Meanwhile, Westpac chief economist Dominick Stephens interpreted the RBNZ’s announcement in a less dovish fashion.

He said the RBNZ’s blunter language was clearly signalling deeper OCR cuts than the 3% low-point advised in its June Monetary Policy Statement.

“We are not surprised that the RBNZ sees the need for further cuts. However, we are also unsurprised that the RBNZ has moved relatively cautiously at this OCR review.”

There was nothing in the RBNZ’s statement to cause Westpac to alter its forecasts, Stephens said.

“We remain comfortable calling a 2.0% low-point in the OCR, with the odds favouring a 50bps reduction at some point, most likely in September.”

Following the OCR cut, a number of banks - including ANZ, Kiwibank and SBS Bank - made cuts to a range of their rates.

Tags: ANZ banks Kiwibank Mortgage Rates OCR OCR forecasts RBNZ SBS

« OCR cut to 3%More OCR cuts are on the way - RBNZ »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.75 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.75 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 8 April 2024 9:21am

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