RBNZ should stop surprising the market: economist

Sunday 14 March 2004

The Reserve Bank surprised the market for a third time running, this time by not only leaving interest rates unchanged but also in its dovish rhetoric which suggests only one further small rate increase, if any, will be necessary.

By The Landlord

Governor Alan Bollard justified the do-nothing stance by noting that domestic inflation is being offset by weak imported inflation and the strong New Zealand dollar and because of tentative signs the economy may be slowing.

The extent of the surprise can be seen in the way wholesale interest rate markets reacted, the 90-day bank bill rate dropping 15 basis points to 5.5% and the June bank bill futures falling nine basis points to the equivalent of 5.6%.

"They’ve been listening from the sound of it. It’s by far the most dovish (statement) you could have expected," says Brendan O’Donovan, chief economist at Westpac Bank. O’Donovan had hoped Bollard would "see sense" and leave rates unchanged.


He notes that the Reserve Bank’s assumptions have factored in a sharp drop in net migration which should take the heat out of the housing market.

Read More - Opens in a new window
Commenting is closed

Property News

The new face of the NZPIF

There’s been a changing of the guard fronting the NZ Property Investors Federation (NZPIF), with the current president taking over as executive officer from Andrew King.

House Prices

Steady demand makes for rising values

The property market recovery just keeps stepping up the pace, with QV’s latest data revealing that all sixteen of the major cities they monitor saw quarterly value growth in January.

Commercial

Headwinds for the commercial market

Tightening credit conditions could impact on New Zealand’s booming commercial property market, according to the Property Council’s chief executive.

Mortgages

Heartland launches reverse mortgages for investors

Heartland has expanded its reverse mortgage business and will now lend against investment properties and second homes, as the product becomes more popular in New Zealand.

Site by PHP Developer