• The RBNZ cut the OCR by 50 basis points to 2.5% and stated it expected to “keep the OCR at or below the current level through until the latter part of 2010”.
• This latest move by the RBNZ will contain longer-term interest rate expectations and prevent an unnecessary tightening in monetary conditions before the economic recovery has found its feet. The message for borrowers remains that there is no real hurry to fix rates.
• With the OCR now getting very low, its effectiveness on lending rates will depend on the extent to which bank funding costs can fall.  There is the growing likelihood that retail deposit rates become sticky: regardless of the OCR level, deposit rates have to be high enough to continue to keep money flowing into banks.

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