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Will the Reserve Bank change course?

The Reserve Bank will adopt a more neutral tone on the future direction of the official cash rate this month, according to economists at one major bank.

Monday, February 3rd 2020, 10:11AM

The Reserve Bank adopted an "easing bias" through 2019, indicating rates were more likely to be cut than increased. But strong economic and housing data, and the Government's infrastructure plan, could make it abandon its negative outlook, say Westpac economists.

Westpac chief economist Dominick Stephens (pictured) says: "At both the August and November MPSs, the RBNZ implied there was a 50/50 chance of an OCR cut in the near future. The RBNZ’s finger was on the OCR-cut trigger. This was implied not only by the RBNZ’s language, but also by the RBNZ’s OCR forecast. The OCR forecast was 0.9%, half way between keeping the OCR at 1.0% and dropping it to 0.75%.

"We think the RBNZ will abandon this strong easing bias and move to a more neutral monetary policy outlook. We expect the OCR forecast will be steady at 1.0% for at least the coming year. The flavour of the RBNZ’s language may be that it expects to keep the OCR at its current level for an extended period, but will react to evolving data as necessary."

Stephens added: "The RBNZ will probably also repeat its long-held line that it expects to keep the OCR low for an extended period, to help ensure that markets do not overreact to the change of stance. This would be a small surprise to financial markets, which have been steadily moving away from the idea of OCR cuts, but probably still expect the RBNZ to maintain its easing bias."

While green shoots of optimism creep into the economic outlook, Westpac economists agree with Tony Alexander that the coronavirus could impact growth and the direction of the OCR. 

"The coronavirus outbreak is a key uncertainty. If the situation worsens enough over the coming week, then the RBNZ could maintain its easing bias. More likely, the RBNZ will adopt a “wait and see” approach, saying that it will monitor the coronavirus and react if necessary."

Westpac predicts the RBNZ will be prompted to cut rates in the second half of 2020. 

"We still think the longer-term risks are more tilted towards a lower OCR than higher," Stephens added.

Tags: RBNZ Reserve Bank Tony Alexander Westpac

« Could the coronavirus hit the housing market?ANZ raises key mortgage rates »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 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 6.79 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 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 28 March 2024 9:42am

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