OCR Preview: caution expected
Friday 22 March 2019
TMM - News
Leading economists do not expect a change to the OCR next week, and predict the central bank will maintain a cautious outlook on the domestic and global economy.
Rates are widely expected to stay on hold as the Reserve Bank makes its next OCR decision on Wednesday, according to TMM Online's Preview Survey.
This week's GDP figures showed the New Zealand economy grew by 0.6% in the December quarter, slightly stronger than economists expected. The economy has not lost as much momentum as first thought, reducing the near-term risk of an OCR cut.
Economists contacted by TMM say Adrian Orr will stick to his guns, and markets seem to agree. The probability of an RBNZ rate cut (before November) fell from 52% to 48% this week, according to Bloomberg.
The central bank's current stance is for rates to remain on hold through this year and next year. It says rates could go up or down in 2021.
Independent economist Michael Reddell does not expect the Reserve Bank to "materially" change its language, while Annette Beacher of TD Securities said there "was no scope for change". NZIER's Christina Leung believes the governor will be "slightly more cautious", but to "reiterate its neutral stance".
Reddell expects RBNZ to "err towards changing as little as possible in this particular statement/review", as it looks to implement its Monetary Policy Committee on April 1.
Following this week's GDP numbers, economists at Westpac say it "seems more likely now that the RBNZ will hold its line in next week’s statement", rather than adopting a dovish tone. "There just isn’t a strong case for interest rate cuts in an economy that is trundling along at about its potential," the economists, led by Michael Gordon, added.
Next week's OCR review comes as influential central banks adopt a more conservative tone across the globe. This week, the US Fed voted to keep interest rates on hold, and said it did not expect rates to rise for the rest of 2019 due to slow growth. Elsewhere, markets expect Australia's Reserve Bank to tighten monetary policy amid cooling growth.
Comments from our readers
No comments yet
Sign In / Register to add your comment
New Zealand’s housing shortage is getting worse, not better, and that’s why huge price falls are unlikely going forward, according to Kiwibank economists.
National property values continue to fall with the rate of annual growth dropping from 3.8% in June 2018 to 1.7% in June 2019, the latest REINZ House Price Index reveals.
Flexible working spaces are more than just a fleeting trend and the launch of a new co-working serviced office franchise programme will open up the market to investors.
LVR restrictions on mortgage lending could be a "permanent setting", according to Reserve Bank deputy governor Geoff Bascand.