Early prediction on October’s official cash rate call

by Maya Breen07 Oct 2015
Inflation indicators have remained subdued over the last quarter, with the weakest result in net selling prices since 1999, latest figures from the New Zealand Institute of Economic Research (NZIER) show. 

According to ASB’s monthly economic update, the weak inflation measures from the NZIER are cause for concern and their economists expect one more official cash rate cut from the Reserve Bank of New Zealand (RBNZ), stating it will be a close call between October and December with October currently favoured. 

The NZIER reported a fall in business confidence over the third quarter, although the decline was not as steep as indicated in ASB’s monthly survey.

ASB’s update stated the fall in confidence may not be enough to concern the RBNZ, as it already cut the cash rate 75 basis points since June which should help provide support going forward. 

NZIER Quarterly Survey of Business Opinion points to reasonable resilience in the underlying momentum in the economy, the bank’s economists concluded and they will continue to assess global developments, the NZD and the outcome of Q3 CPI next week.

ASB’s September economic update stated a risk of the OCR falling below 2.5% in 2016.

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