OCR rises but Bollard surprisingly dovish

Thursday 28 October 2004

While Reserve Bank governor Alan Bollard raised interest rates this morning, as everyone expected, he surprised the market with his surprisingly dovish rhetoric.

By The Landlord

Bollard raised the official cash rate (OCR), which directly affect floating mortgage rates, from 6.25% to 6.5%.

But he said that current monetary policy settings "are now doing enough to ensure price stability." Some economists had expected an outside chance that the OCR would go to 6.75% today and many had been thinking there was a very good chance of it going to that level in December.

The currency markets reacted immediately, pushing the New Zealand dollar down half a US cent to 68.90 US cents. The reaction in wholesale interest rate markets was more subdued with the 90-day bank bills little changed while the December 90-day bank bill futures slipped from implying the physical bills will be at 6.83% in December to 6.75% by then.


Craig Ebert, an economist at Bank of New Zealand, says that he now rates the chance of a rate hike in December at just 20%, down from 50% before today's move. "At the margin, it's a bit more dovish than we had expected," he says.

Read More - Opens in a new window
Commenting is closed

Property News

Major industrial development powers on

It’s full steam ahead for the Stevenson Group’s $800 million, 361-hectare industrial and residential development in South Auckland – despite the uncertainties of the post-Covid-19 era.

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

Resilience needed in face of change

The Reserve Bank says the commercial property sector is vulnerable to the Covid-19 crisis. But PMG Funds' chief executive believes that while there’ll be short-term pain, the biggest long-term impact will be structural change.

Site by PHP Developer