It says interest rates “can be expected to remain low”
The Official Cash Rate (OCR) has remained unchanged at 1.0 percent, with the Monetary Policy Committee stating that conditions since August “did not warrant a significant change” to the monetary policy outlook.
The Reserve Bank highlighted the ongoing global political and trade tensions, a dampening demand for New Zealand goods and services and low domestic business confidence, and says New Zealand interest rates “can be expected to be low for longer” as a result.
The Reserve Bank noted that its lowered OCR has reduced retail lending rates, which has in turn eased the NZD exchange rate. It says keeping the OCR low will be necessary to ensure inflation increases to the mid-point of its target range.
The unchanged OCR is in line with economist expectations, and ASB economists say a further 25bn cut in November is still expected – however, this latest statement from the Reserve Bank suggests it is not guaranteed.
“Even though the OCR remained steady at this meeting, a lower OCR remains very much on the cards,” ASB chief economist Nick Tuffley stated.
“But by itself the statement suggests that a November cut isn’t a dead certainty, even though we think it is the highly likely outcome.”
Tuffley says the risks are still stacked towards a further OCR easing post-November, with potential triggers including ongoing weak business and consumer confidence, weakness in global growth, increased bank capital requirements, and a downward estimate of how low unemployment can sit before generating added inflation.
