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Bollard to cut OCR by 150 bps next week: Citi economists
Citigroup Global Markets economists said they now expect Reserve Bank Governor Alan Bollard to cut the Official Cash Rate by 150 basis points next Thursday to 3.5%. The Citi economists also revised their forecast for the OCR over 2009, predicting it to reach as low as 3% by June and staying there through December.
They pointed to New Zealand's falling inflation rate as being the key to allowing the RBNZ to cut more aggressively. The consensus in New Zealand has been for a 100 basis point cut to 4%, but signs are emerging that a larger cut may be on the cards.
"The falling inflation environment (along with the weakening economy) will provide the RBNZ with clear support for a further monetary policy easing at the 29 January OCR Review," Citi economist Stephen Halmarick said.
"Given the very weak Asian economic data this week, and the large fall in Q4 08 CPI, we now expect the RBNZ to ease by 150bp at the 29 January OCR review."
"Further easing at the 12 March Monetary Policy Statement is also expected, with the growing risk that the RBNZ will need to take the cash rate lower than our previous forecast of 3.5%."
Citi also said that there was now a strong possibility that the Reserve Bank of Australia will cut its official rate by 100 basis points on February 3 to 3.25%, from its previous forecast of a 75 basis point cut. They said their new expected low in Australia was 2.25%, following another 75 basis point cut in March.
"The highly synchronized nature of this global economic downturn and the truly appalling economic news since the start of the year is likely to have surprised the RBA on the downside (as it has us)."
10 Comments
OCR ALAN DROP IT 2%.JUST
OCR ALAN DROP IT 2%.JUST DO IT.
Jill, He might, but if
Jill,
He might, but if he does what are you expecting it to do for the economy?
Please spell out your hypothesis so we can see if it is proved or disproved (2% or 1% + 1% - 6 weeks won't make much difference).
Jill If rates hit Zero
Jill
If rates hit Zero our system has failed, its getting way to close for me. The consequences of the recent actions on the money markets and the Govt's sudden demand for large amounts of borrowing run the risk of a down grade and a failure to continue our free spending ways. We have %95 of GDP borrowed offshore. S&P have warned us.
The IMF would do the opposite huge cuts in Govt spending and higher interest rates. Why is the IMF medicine so different from our reserve banks solution? Every thing has consequences we better be prepared to live with the results as we head for Zero!
anyone thinking of going back
anyone thinking of going back to trading chickens, goats and bananas - it's kinda going to be a hassle - they tend to get a bit mashed going through the EFTPOS terminals. I think the cash will be around for a bit longer - but i have seen the 50 billion dollar notes from Zim that afford you one slice of mouldy bread - i dunno, but what ever the dollar is worth, is what rentals will rent for, but it would be nice to pay off a huge mortgage with a million dollar note or two and then just live off any rent received even be it those chickens, goats or bananas....
Brent,the Zim note is relevant
Brent,the Zim note is relevant here because who puts money in the bank over there?and who would put it in the bank here for 1% interest?when interest rates were high I would have almost nothing in my cash acct and sweep it all into online savings,now why bother?I carry cash in my wallet and it gives you a new appreciation of value if there is going to be a recession to survive maybe cash is the strategy that can work.when your cash runs out you have to stop spending.
Bank economist says if Bolard
Bank economist says if Bolard cuts 1% next week 5.5% fixed mortgages for 5 year term will be available within a matter of weeks.
If Bollard cuts 2% then maybe we will even see 5 years fixed at 4.5% - what a relief that will be if you have a big mortgage.
If you have a big
If you have a big mortgage, then are you part of the problem? Trying to skip a few rungs on the property ladder and get that 'dream home' before you really were in a position to afford it?
Are you asking a question
Are you asking a question or is your voice breaking?
Ok, coming from another angle,
Ok, coming from another angle, it sounds like Russell was sure, like so many others that capital gains is always guaranteed and lets you sail real close to the wind. Not so. I could understand that people become financially stressed when losing an income or part of one in a household, unforseen cirucmstances etc and are thankful for any relief. But to be that close to the brink that the only thing going to save you is another percentage point off the mortgage, well it seems to me that you might just have overstretched yourself signing up that mortgage to start with.
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