OCR Preview Survey: OCR set to remain on hold
Monday 22 June 2020
Economists expect the Official Cash Rate to remain on hold this week, but say the Reserve Bank could talk about negative rates in 2021.
According to TMM Online's OCR Preview Survey of leading economists, all forecasters say the OCR will remain at 0.25% on Wednesday.
Amid the sharp economic downturn caused by Covid-19, the Reserve Bank has reiterated the OCR will not be changed until early next year.
Economists do not expect a surprise on Wednesday, but say there are key messages to watch out for.
Tony Alexander is keeping an eye on any comments "regarding the economic outlook, and if they have become marginally less pessimistic", while ANZ's Sharon Zollner is watching "the implicit impact on their forecasts of the earlier exit from lockdown than they had assumed".
The central bank could also mention a possible expansion of its quantitative easing programme. Jarrod Kerr of Kiwibank believes the LSAP programme is "the most useful" tool in this crisis, and says "the RBNZ will be forced to do more to get the economy humming into 2021.
The prospect of a negative OCR could be another key talking point.
NZIER's Christina Leung said the Reserve Bank would "continue to leave the door open to negative interest rates next year", while Donal Curtin of Economics NZ said "it's possible they might signal a willingness to go to 0 or even negative once the current 'technical difficulties' with negative rates have been solved".
The Reserve Bank has given trading banks several months to prepare for the possibility of negative rates if the economy worsens.
Economists are divided over whether the Reserve Bank will pull the trigger on negative rates next year.
Tony Alexander, ANZ's Sharon Zollner, ASB's Nick Tuffley and Leung are among those who believe the OCR has troughed in this cycle.
Yet others, including Curtin, say there is a strong chance of negative interest rates in the medium term.
Curtin described the odds as "50-50", while Prashant Newhana of TD Securities said a second wave of Covid-19 "would push the RBNZ to cut next year".
Comments from our readers
No comments yet
Sign In / Register to add your comment
Property News
Investors not rushing to sell
There is no rush of investors looking to sell their properties in the post-Covid-19 market, according to the second joint survey from REINZ and economist Tony Alexander.
House Prices
S&P forecast 10% house price fall
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.
Commercial
Augusta Capital takeover bid now unconditional
ASX-listed Centuria Capital has declared that its takeover of New Zealand property funds manager Augusta Capital is now unconditional, as it has secured nearly 66% of Augusta’s shares.
Mortgages
Advisers buoyed by strong property market
The New Zealand property market has emerged strongly out of lockdown, according to mortgage advisers, who say they are busy as ever this winter.
