Economists split on rates announcement

Monday 8 March 2004

Economists are divided as to whether Reserve Bank governor Alan Bollard will raise rates again when he releases his latest monetary policy statement on Thursday, but most think it will be a close call.

By The Landlord

Bollard surprised the market in January when he raised the official cash rate (OCR) from 5% to 5.25%, citing stronger than expected household spending and activity in the construction and housing market.

Now, ANZ Bank thinks he will follow that up by raising it to 5.5%, although it says the strong New Zealand dollar could make this a close call.

"But given the absence of conclusive signs that momentum in domestic activity is yet waning to a significant extent, we believe that the Reserve Bank will seek to further ensure that domestic inflation pressures do not get out of hand," ANZ says.

ASB Bank, however, thinks the central bank will hold off until it sees more evidence of whether or not the economy is slowing.

"We do not believe the data have been sufficiently strong enough to offset the continued appreciation of the New Zealand dollar. Recent data suggest the economy is still operating at healthy levels but the momentum may be waning," ASB says.

Westpac says it’s like tossing a coin. "We have been worried that the coin may come up heads, while we would rather the Reserve Bank would think with their heads," it says. It hopes the central bank "will see sense and not raise rates," arguing this is the "path of least regret." While there is a risk inflation may breach the 3% target and of a housing bubble, there’s also a risk the economy will implode, it says. But the dollar’s drop in recent weeks from near 71 US cents to the 67.50 cent level may be enough to convince Bollard otherwise.

Read More - Opens in a new window
Commenting is closed

Property News

Downward pressures might push investors out

There’s a major housing market downturn coming and it’s likely to reduce the number of investors in the market, according to ANZ economists.

House Prices

House price drops are short-lived - Alexander

Periods of house price decline are rare and "short-lived", says economist Tony Alexander, amid forecasts of a drop of 10%-15% this year.

Commercial

Industrial holdings leave Provincia in strong position

Tales of strife and problems abound in the commercial property world these days, but the impact of the Covid-19 pandemic has not been as devastating for all commercial players.

Mortgages

Mortgage lending slumps to record low in April

Mortgage lending fell to its lowest level on record last month as the property market ground to a halt during the Covid-19 lockdown.

Site by PHP Developer