Economist says inflation data could still affect the central bank’s decision
Westpac economists believe that the recent increase in median house prices could prompt the Reserve Bank of New Zealand (RBNZ) to “pause for thought” before pushing for further official cash rate (OCR) cuts.
The comments follow Real Estate Institute of New Zealand (REINZ)’s latest report, revealing a 6.6% increase in median house prices in the year ending September 2019.
Dominick Stephens, chief economist at Westpac, said that the expected cut in November is still “not a done deal” as the regulator could still have second thoughts if inflation data would end up better than expected.
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“I'd say the odds were closer to 60% [in favour of a cut]. The balance is probably in favour of a cut, but our view is there will not be another one in 2020 because of further growth in the housing market,” Stephens said, as reported by Landlords.co.nz.
Other Westpac economists said in the bank’s weekly comment on the housing sector that REINZ’s latest data “would undoubtedly make [RBNZ] sit up and take notice.”
“It is unlikely that the RBNZ’s policy of loosening the LVR restrictions will be eliminated, but a stronger housing market might slow the pace of loosening,” the report said.
