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Business Weekly Economic Report
Focusing on the yellow weeds
Monday, 03 August 2009
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The RBNZ kept the OCR unchanged at 2.5% last Thursday, as was widely expected. The RBNZ made it pretty clear that it still has an easing bias and that further OCR cuts cannot be ruled out.
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The RBNZ stated that current levels of the NZ dollar and wholesale interest rates are higher than assumed in its forecasts. “The forecast recovery is based on a further easing in financial conditions. If this easing does not occur, the forecast recovery could be put at risk. In these circumstances we would reassess policy settings.” This statement suggests the RBNZ is more willing to cut the OCR in response to the higher NZD.
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We continue to expect the NZD to be strong over the next year, which does reinforce the prospect of the RBNZ having to cut the OCR further.
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Report Prepared by:
Jane Turner
ASB Economist
Phone: +64 9 374 8185
Fax: +64 9 302 0992
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