Experts predict Reserve Bank will maintain OCR in next review

by Roxanne Libatique07 Feb 2020

Experts have predicted that the Reserve Bank of New Zealand (RBNZ) will keep the official cash rate (OCR) at its current level at next week’s review but would continue to look into the impact of the coronavirus outbreak on the country’s economy.

Stephen Toplis, head of research at BNZ, commented that the central bank has no excuse even to contemplate lowering interest rates.

“To the contrary, in and of itself, these figures suggest the RBNZ should be seriously considering raising rates,” Toplis said, as reported by Interest.co.nz.

“And the big question on everyone’s lips is what will the coronavirus do to growth, employment, and inflation? Given the extent of this risk, and the uncertainties that surround it, any talk of tighter policy is premature,” he continued. “But, be this as it may, the starting point remains important and there is clear indication in [Wednesday's labour market] figures that the economy does have the ability to absorb some of the current shock without its overall stance becoming unhealthy.”

Read more: Economists see less need for OCR cuts

Sharon Zollner, chief economist at ANZ, said she also expects RBNZ to sit on the sidelines for the time being.

“They will acknowledge the human impact of the tragic new coronavirus, with cautious language about possible risks to the economic outlook. Domestic conditions give the RBNZ scope to wait and see how developments unfold,” she said.

“We expect the OCR track will be broadly unchanged, despite a stronger domestic backdrop. The economic impacts associated with the outbreak are highly uncertain and are likely to sit largely in the ‘risks’ basket for now,” she continued. “But a short-term negative impact on GDP growth, commodity prices and global wholesale interest rates may feature in the central forecast. Exactly how they incorporate it won’t matter too much – any forecast will be out of date in a week.”

Most Read

NZ Adviser TV