Mortgages

Reserve Bank springs surprise with dovish OCR forecast

The Reserve Bank surprised economists by signalling it may keep the OCR rate at 1.75% until 2020, pushing back its forecasts in a dovish statement this morning.

Thursday, August 09th 2018

The Reserve Bank was widely expected to keep rates at a record low, yet market economists were taken off guard by the central bank’s language.

Reserve Bank Governor Adrian Orr hinted at a softer outlook for the New Zealand economy, following a sustained period of weak economic growth.

Imre Spiezer, head of NZ Strategy at Westpac, said the OCR forecast change had sprung a “dovish surprise to markets”.

Westpac’s Dominick Stephens said the forecast change was “predictable” as he “never thought growth could live up to the hype the Reserve Bank expected”.

He added: “We expected a degree of reaction but the question we are asking now is, are they overreacting? We don’t think GDP growth will be as weak as they say in the near term.”

The Reserve Bank said its decision to push back OCR rate forecast had been partly informed by delays in the Kiwibuild scheme. The Reserve Bank said the delays would likely push back delay GDP growth and inflation.

Christina Leung, of NZIER, said the “extent of the [OCR] forecast [change] was surprising”.

She said: “The market was expecting more of a dovish statement but they have pushed it back more than we expected.

"What is more interesting is the scenario of softer growth and what would get them cutting rates. There is not a lot in it to push them to cut.”

ASB’s Nick Tuffley said the Reserve Bank’s language was “softer than generally expected”, but the bank still expects rates to rise “late next year”.

Tuffley said he expected inflation to pick up more quickly than Reserve Bank forecasts, a factor that could lead to a rate rise before 2020.

The forecast will likely lead to an extended period of low rates for New Zealand borrowers.

In a press conference following the OCR announcement, Orr was questioned about keeping a lid on New Zealand house prices.

Orr said high household debt levels and slowing house price growth could see the central bank "revisit" LVR restrictions.

Here's what the bank said: OCR unchanged and to stay low for longer 

Comments

No comments yet

Heartland Bank - Online 6.69
SBS FirstHome Combo 6.74
Wairarapa Building Society 6.95
Unity 6.99
Co-operative Bank - First Home Special 7.04
ICBC 7.05
China Construction Bank 7.09
BNZ - Classic 7.24
ASB Bank 7.24
ANZ Special 7.24
TSB Special 7.24
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.45
China Construction Bank 6.75
TSB Special 6.75
ICBC 6.75
ANZ Special 6.79
ASB Bank 6.79
AIA - Go Home Loans 6.79
Kiwibank Special 6.79
BNZ - Classic 6.79
Unity 6.79
Westpac Special 6.39
China Construction Bank 6.40
ICBC 6.49
SBS Bank Special 6.55
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
ASB Bank 6.55
AIA - Go Home Loans 6.55
TSB Special 6.59
Kainga Ora 6.99
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50

More Stories

Support for regulation

Monday, March 18th 2024

Support for regulation

REINZ has emphasised the need for property management regulation to Parliament’s Social Services and Community Committee.

A better investment market

Thursday, March 14th 2024

A better investment market

“Reinstatement of interest deductibility starting from the new tax year on 1 April brings property investors back in line with every other business in the country, where interest costs are a legitimate deductible expense," Tim Horsbrugh, New Zealand Property Investors Federation (NZPIF) executive committee member says.

[OPINION] Recessionary times

Thursday, March 14th 2024

[OPINION] Recessionary times

It is not the best out there for many businesses and property sector people. Sales are down across the board, our clients’ confidence is falling, and there is a lot of uncertainty.

Interest rate expectations: It’s not over yet

Thursday, March 07th 2024

Interest rate expectations: It’s not over yet

Most Kiwis think interest rate increases have peaked.