They are concerned about the impact of unemployment rate on the central bank’s decision
Bank economists seem to be divided over the Reserve Bank of New Zealand (RBNZ)’s official cash rate (OCR) review, to be released on November 13.
They were concerned with the effect of unemployment rate to the central bank’s decision, as they predicted that the figure will increase from the 11-year low of 3.9% hit in the June quarter to between 4% and 4.2%.
ANZ economists noted that the data is known to be volatile, while ASB economists reminded that the central bank slashed the OCR by 50 basis points in August following upbeat June quarter results.
Westpac economists, on the other hand, believe that it would take a substantially worse result than what was predicted to push RBNZ to cut the OCR next week – noting that it might also wait until February before cutting the OCR from 1% to 0.75%.
Read more: Economists predict “small loosening” of LVR in November
ANZ economists said that the labour market “has so far been surprisingly solid in the face of slowing economic momentum, and it is possible that this theme continued over the September quarter.”
“However, with the economy now running below trend pace and forward indicators suggesting that’s going to remain the case for a while yet, spare capacity in the labour market is expected to open up. It just may happen a little slower than we’re expecting,” they added, as reported by Interest.co.nz.
“Looking forward, we expect the unemployment rate to lift a little further over the year ahead, peaking at 4.5% by the end of 2020 before gradually improving as economic momentum slowly recovers. Employment growth is expected to remain modest, with the participation rate remaining at a high level and migration coming off its peak.”
