OCR reduced to 3.5%
Thursday 29 January 2009
The Reserve Bank today reduced the official cash rate (OCR) from 5.0% to 3.5%.
By The Landlord
Reserve Bank Governor Alan Bollard commented that “the news coming from our trading partners is very negative. The global economy is now in recession and the outlook for international growth has been marked down considerably since our December Monetary Policy Statement.
“Globally, there has been considerable policy stimulus put in place and we expect this to help bring about a recovery in growth over time. However, there remains huge uncertainty about the timing and strength of a recovery.
“The extent of the decline in global growth prospects and the ongoing uncertainty has played a large part in today’s decision. We now expect the impact on New Zealand of these developments to be greater than we did in December, as a result of a more negative outlook for the terms of trade and exports, and tighter credit conditions.
“Inflation pressures are abating. We have confidence that annual inflation will be comfortably inside the target band of 1 to 3% over the medium term.
“Given this backdrop it is appropriate to take the OCR to a more stimulatory position and to deliver this reduction quickly.
“Today’s decision brings the cumulative reduction in the OCR since July 2008 to 4.75 percentage points. Lower interest rates will have a positive impact on growth, alongside a lower exchange rate and fiscal stimulus, provided firms and households do not unnecessarily contract their spending.
“To ensure the response we are seeking, we expect financial institutions to play their part in the economic adjustment process by passing on lower wholesale interest rates to their customers. This will help New Zealand respond flexibly.
“Further movements in the OCR will be assessed against emerging developments in the global and domestic economies and the response to policy changes already in place. We would expect any further reductions to be smaller than those seen recently.”
More commentary about this story can be found on www.goodreturns.co.nz
Commenting is closed
Uncertainty continues to cast its shadow over the housing market but economist Tony Alexander has put together a list of reasons which offset the negatives and mean the market remains well-supported.
Global ratings agency Standards & Poors is the latest to join the chorus of predictions around potential house price falls in New Zealand – and they’re picking a 10% drop.
Auckland ’s long-term future is sound as well situated residential developments will always sell and demand for affordable housing remains strong, a leading non-bank property financier says.
The New Zealand property market has emerged strongly out of lockdown, according to mortgage advisers, who say they are busy as ever this winter.