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OCR reaction: economists surprised but expect 2020 cut

Economists were surprised by the Reserve Bank's decision to keep the official cash rate on hold, but expect the central bank to ease rates next year.

Wednesday, November 13th 2019, 2:42PM

The OCR remains on hold at 1%, as the Reserve Bank unveiled its latest decision and Monetary Policy Statement. 

The decision was a close call. According to the central bank's meeting notes, the Monetary Policy Committee "noted that the risks to the economy in the near term were tilted to the downside and agreed it would add further monetary stimulus if economic developments warranted it".

Westpac's Dominick Stephens expected a cut following weak inflation data earlier this week. He said the decision to hold showed the RBNZ was "not scared of staring down financial markets". 

"We always viewed it as a close call, and that's what the RBNZ said. In our view, the low point in the OCR cycle will be 0.75%," Stephens added. "There are a couple of things on my mind, the housing market is likely to be much stronger than the Reserve Bank is forecasting. On the other hand, I wouldn't be surprised if the global economic situation worsens before then. The balance of those two will decide whether there's a move in February."

Kiwibank's Jarrod Kerr said he was "surprised" by the move, and that the Reserve Bank left the OCR track unchanged. 

"They have given us the same 40% chance that another rate cut will be needed. They have said if things deteriorate they will keep cutting, but that they didn't have enough information to go lower today. We thought we had seen enough."

Brad Olsen of Infometrics said the central bank would wait to see whether its August cut was deep enough.

Olsen added: "The Reserve Bank has stuck to its guns this month and seems to be waiting and hoping that August’s 50 bp cut is enough to stimulate the economy. The Bank’s made it clear that it is prepared to cut again if conditions dictate."

Independent economist Michael Reddell hit out at the decision to keep rates on hold. 

"Inflation below target, risks to the downside, world economy still slowing, low or falling inflation expectations, all combine to make a strong case for a cut. But they sit on their hands. It is a poor decision and two successive MPSs in which they have wrong-footed markets suggests the problem is with them not the markets. They need to rethink their comms approach."

 

Tags: OCR OCR forecasts RBNZ Reserve Bank

« Westpac plans turnaround time overhaulWholesale interest rates rise after OCR decision »

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 ▲4.05 4.49
ANZ Special - 3.55 ▲3.55 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
BNZ - Classic - 3.49 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide ▼5.65 ▼4.75 ▼4.75 -
Credit Union North 6.45 - - -
Credit Union South ▼5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.54 3.54 3.69
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank ▼5.20 ▲4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▲3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.39 3.45 3.89
Sovereign 5.30 ▼3.89 ▼4.05 ▼4.39
Sovereign Special - ▼3.39 ▼3.55 ▼3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.45 3.99
Median 5.34 3.99 4.07 4.39

Last updated: 9 December 2019 9:02am

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