Westpac says RBNZ is unlikely to announce any changes to the OCR on Thursday
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The Reserve bank of New Zealand (RBNZ) is unlikely to alter the Official Cash Rate (OCR) on Thursday, according to Westpac’s preview of RBNZ OCR Review.
In the wake of the general elections, and as we wait to know the makeup of the next Government, and what the governing coalition will look like, RBNZ would be ill advised to commit itself to any new course for monetary policy, Westpac’s review showed.
Westpac Chief Economist Dominick Stephens said in the report, that fortunately the economic situation is such that the RBNZ probably can “afford to sit on its hands for now”.
The RBNZ has run a very consistent line on monetary policy over the past six months, and it seems highly likely that it will play a “straight bat again” on Thursday.
But Westpac’s review added that “just because the RBNZ is likely to play it safe on this occasion”, doesn’t mean that monetary policy has “gone stale”.
There is quite a lot going on beneath the surface. Since, the RBNZ published its August Monetary Policy Statement there have been four key developments, which will need to be acknowledged.
“This situation is not going to change any time soon, so we expect that the housing market is set to stay subdued, and that construction activity will expand more slowly than we had previously forecast,” Stephens said.
The RBZN will announce the OCR on Thursday, 28 September at 9:00am.
Related stories:
Cash rate predicted to hold, housing market slowing: major bank
RBNZ forecasts low rates to stay, sees weaker inflation ahead
In the wake of the general elections, and as we wait to know the makeup of the next Government, and what the governing coalition will look like, RBNZ would be ill advised to commit itself to any new course for monetary policy, Westpac’s review showed.
Westpac Chief Economist Dominick Stephens said in the report, that fortunately the economic situation is such that the RBNZ probably can “afford to sit on its hands for now”.
The RBNZ has run a very consistent line on monetary policy over the past six months, and it seems highly likely that it will play a “straight bat again” on Thursday.
But Westpac’s review added that “just because the RBNZ is likely to play it safe on this occasion”, doesn’t mean that monetary policy has “gone stale”.
There is quite a lot going on beneath the surface. Since, the RBNZ published its August Monetary Policy Statement there have been four key developments, which will need to be acknowledged.
- The global economy has strengthened further and the US Federal Reserve has edged closer to tightening monetary policy
- The Trade Weighted Index is averaging about 1.5% lower than the RBNZ’s forecast
- Construction activity has turned out weaker than the RBNZ was expecting. GDP figures show that construction activity fell 3.2% over the first half of 2017, and recent dwelling consent numbers have been weak
- The housing market has turned out much weaker than the RBNZ was forecasting. In the August MPS, the RBNZ forecast that house prices would rise 3.2% over the six months to September 2017, however latest data suggested that house prices have instead fallen by 1.5%.
“This situation is not going to change any time soon, so we expect that the housing market is set to stay subdued, and that construction activity will expand more slowly than we had previously forecast,” Stephens said.
The RBZN will announce the OCR on Thursday, 28 September at 9:00am.
Related stories:
Cash rate predicted to hold, housing market slowing: major bank
RBNZ forecasts low rates to stay, sees weaker inflation ahead
