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OCR to remain on hold: economists

Economists expect the Reserve Bank to leave the official cash rate unchanged this week, but suggest more support is on the way for lenders, individual borrowers and businesses.

Monday, November 9th 2020, 7:59AM 1 Comment

Jarrod Kerr

TMM's latest OCR preview survey, conducted among leading NZ economists, reveals analysts unanimously believe the OCR will stay at its record low of 0.25%. 

The central bank is tipped to cut interest rates to negative territory in the next six months in an effort to kickstart the economy after the Covid lockdown and subsequent turmoil. 

But no changes are expected on Wednesday as the RBNZ focuses on other tools to boost the economy. 

The central bank is poised to reveal its Funding for Lending Programme, which will provide cheaper funding for retail banks through the crisis. 

The RBNZ is expected to use the FLP to channel low cost funding to businesses.

The FLP, estimated to total anywhere from $30 billion to $50 billion, will be focused towards SMEs, economists at ASB said. 

The Reserve Bank is expected to comment on the soaring housing market since the pandemic. RBNZ measures, including lower interest rates, no LVR restrictions, and quantitative easing, have led to record prices this year despite the turmoil. 

Independent economist Tony Alexander told TMM he expects the central bank to note "expressions of concern regarding low deposit bank lending, plus acknowledgment of positive trends in the economy".

Alexander is one of the few survey respondent who believes the OCR has troughed in this cycle. 

Donal Curtin of Economics NZ also expects the RBNZ to address the housing market. 

"And while they may well be comfortable with higher asset prices, as that's one of the channels that monetary policy works through, is it time to say something about the risk of valuations getting too rich, for the likes of houses and equities. And will they want to say something more about the effect on wealth inequality."

Kiwibank's Jarrod Kerr said the "outlook is still clouded with uncertainty", and predicts the OCR will fall further in the months to come. 

The RBNZ could hint further at a cut this week, Kerr said.

Kerr does not think a negative OCR would be effective, but expects the central bank to pull the trigger early next year.

"We are expecting the RBNZ to set us up for an OCR cut in February. The RBNZ could do so by lowering the OCR track, to reflect the probability of future cuts. Or at the very least, there needs to be a negative rate scenario for us to play with."

Tags: OCR OCR forecasts RBNZ Reserve Bank

« ASB using debt-to-income ratiosHeartland online floating rate falls to 2.5% »

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Comments from our readers

On 9 November 2020 at 11:28 am KiwiInvestor said:
It's all very well & fine for the RBNZ to be providing more tools for Banks to lend, but when individual bank policies are tightening up (E.G. ASB has introduced DTI on lenders) it isn't a fair playing field! If the RBNZ intentions are to increase the velocity of money into the economy, they need to make sure the banks are on the same page for borrowers to access funding otherwise, no matter what tools the RBNZ provide it won't have the effect they are after. RBNZ... suggest you have a 'strong word' to the main banks about there lending criteria.

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.09 3.25 3.39
ANZ Special - 2.49 2.69 2.79
ASB Bank 4.45 2.49 2.59 2.65
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.49 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.09 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
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 3.95 2.89 2.97 3.39
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.45 ▼2.45 ▼2.65
Kainga Ora 4.43 2.93 3.07 3.24
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.30 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 2.99 3.15 3.25
SBS Bank Special - 2.49 2.65 2.75
The Co-operative Bank - First Home Special - - - -
The Co-operative Bank - Owner Occ 4.40 2.49 2.69 2.79
The Co-operative Bank - Standard 4.40 2.99 3.19 3.29
TSB Bank 5.34 3.29 3.29 3.59
TSB Special 4.54 2.49 2.49 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.49 2.69 2.79
Median 4.55 2.94 3.07 2.80

Last updated: 23 November 2020 12:23pm

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