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MR - Experts Views

Scattered OCR forecasts by economists

Thursday 5th of August 2010

The Reserve Bank increased the Official Cash Rate (OCR) by 25 basis points to 3.00% as widely expected last Thursday. However it also made comment that the pace and extent of further OCR increases is likely to be more moderate relative to the track set in June.

The major banks have now changed tack with completely different expectations from their economists as to how the tightening cycle will track.

In ANZ Market Focus economists expect the Reserve Bank to deliver one more hike in September and then pause to assess the landscape. It believes the OCR will undoubtedly move up over time, with pauses on the way, as the Reserve Bank seeks to get rates closer to neutral.  

ANZ says one challenge a post-September pause faces is that it effectively rules out moving in October and December and re-starting the tightening cycle in January (an OCR Review date) is not ideal, effectively leaving March, which is a long time to pause with rates still well below neutral.

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Paul Flood: The danger is that the 'goalposts' (regarding what is acceptable or unacceptable adviser conduct) may be susceptible to change. Our 'Principles based' legal/regulatory environment lends itself to “prevalence-induced concept change” over time, perhaps not so much in the written laws and Code, as in the interpretation of the prescribed principles.
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