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ANZ economists forecast an OCR cut to 0.10% in May, but no longer see the RBNZ making the leap into negative territory

ANZ economists forecast an OCR cut to 0.10% in May, but no longer see the RBNZ making the leap into negative territory
Image sourced from pxhere

ANZ economists no longer believe the Reserve Bank (RBNZ) will cut the Official Cash Rate (OCR) into negative territory.

However, they believe the central bank will still need to maintain a dovish bias for some time to head off any premature tightening in monetary conditions, so will cut the OCR from 0.25% to 0.10% when it releases its next Monetary Policy Statement in May.

The Reserve Bank of Australia made such a move in November. 

Previously ANZ economists forecast a small cut in May being followed by a cut to -0.25% in August.

ANZ chief economist Sharon Zollner said loosening monetary policy a bit further without making a riskier call and going negative would be a “strategic” move by the RBNZ.

She said it might shave 10 or 15 basis points off already rock-bottom mortgage rates, but this would depend on other factors too.

“We don’t have a strong conviction that another OCR cut is necessary," Zollner said. 

"But on balance, we think a last insurance cut makes strategic sense, given the economic outlook, the risks around it, and the RBNZ’s ‘least regrets’ approach.

“The outlook remains very uncertain, and even the current situation is obscured by enormous data volatility.

“But by May, core inflation and employment are likely to still be well short of target, and the RBNZ will not yet have conviction that these are consistently heading in the right direction, even if the outlook is looking brighter.

“The fact is, overshooting inflation would be far easier to deal with than a slump, with the zero bound looming large. So why not do what you can to tilt the risks in that direction?”

But, Zollner believed cutting the OCR below zero was no longer necessary as a booming housing market had supported household spending and construction, there have been vaccine developments, New Zealand commodity prices have held up, the labour market is tighter than expected, the wage subsidy kept people attached to their jobs, and we haven’t (touch wood) needed another major national lockdown.  

All this said, Zollner noted: “If the housing market and domestic economy maintains momentum well into autumn, the RBNZ will not cut again at all.

“If COVID-19 returns to our shores in a significant way, a negative OCR will once more be game on.”

OCR just one of the tools the RBNZ is using to loosen monetary conditions…

Zollner recognised the other tools the RBNZ is using to try to lower interest rates to boost inflation and employment have their limits.

For example, the RBNZ might not be able to buy up to $100 billion of New Zealand Government Bonds via its Large-Scale Asset Purchase Programme (LSAP) by June 2022, as planned, without becoming too large a player in this market.

Treasury forecasts it’ll issue fewer bonds (debt) than planned before the RBNZ set it LSAP, as the New Zealand economy is doing better than expected. And an indemnity provided to the RBNZ by the Finance Minister restricts the RBNZ from buying more than 60% of New Zealand Government Bonds on issue.

Rather than buy fewer bonds, Zollner expected the RBNZ to extend the timeframe over which it would make its purchases by say six months to the end of 2022. 

“This adjustment would speak to stimulus remaining in place for a long time, reaffirming the RBNZ’s forward guidance that monetary policy will remain expansionary, while allowing the RBNZ flexibility to affect the yield curve should risks arise,” she said.

Zollner also noted that while the RBNZ’s Funding for Lending Programme is starting to lower lending rates, “it’s been a slow start”.

Under this scheme, the RBNZ is making up to $28 billion available for banks to borrow at a low cost in the hope this will enable them to lower lending rates to help boost inflation and employment.

Since the Programme was launched on December 7, two draw downs of $40 million and $1 billion have been made.

The only mortgage rate cut of 2021 has come from Westpac, which reduced its “special” one-year rate by 20 basis points to 2.29%.

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So, no 1.5% mortgages then?

Likely to go close though - FLP funding at current OCR of 0.25% and if OCR goes to 0.1% then that will the new funding rate.
Banks only just starting to take up FLP so still some downside likely on current lows of 2.29%. Outlook for those either taking new or rolling over mortgages over can only be positive.

Still likely. 1.2-1.4% likely a floor.

The economy has not recovered. People are spending money on unrealised house price gains. There is still pain to come as businesses restructure with no wage subsidy this year.

Real shame that interest rates reduction has not gone much to other productive assets. Incompetent govt stalling projects will not help. I think we are file to believe we are out of the worse recession in our lifetime as we are blinded by house price increases.

Chessmaster - The economy has very much recovered granted helped by oversea travel money - 10 billion still in the economy.
I have no idea what part of the economy you may be involved in but it is booming everywhere.
Worse recession in our lifetime ?? In no way in the world this is true, I'm 63 and this was the best recession in my life time in terms of length and Government assistance.
NZ is in very good shape, sure house prices have risen but it is happening all around the developed world.
Be thankful we can call NZ home.

ANZ economists forecast an OCR cut to 0.10% in May, but no longer see the RBNZ making the leap into negative territory

Why not make it six times the RBNZ cuts interest rates in half since July 2008?

The banks will be mighty pleased to be in receipt of a positive OCR return for ~$30.686 billion RBNZ settlement cash balances parked at the RBNZ as result of selling NZ government bonds to the central bank.

I don’t think they will cut again unless it all turns to crap.

It will turn to crap and interest rates are going up.

Interest rates move in an international herd motion. The acceptable range is determined by our position relative to other currencies. I think the RB will be willing to tolerate a *lot* of inflation before raising rates, but it could get out of their control if another major currency breaks. If that happens, I don’t think the RB will be able to do anything about it.


What we do is extract, use then excrete, parts of the planet. The extraction is of concentrated/good-quality parts, using concentrated/good quality energy. The result is disperse parts and disperse energy - too dispersed to retrieve (takes more energy than it would return).

Forward betting on that extraction/excretion process continually increasing (exponentially, note) was always going to be compromised, then increasingly invalid. Thus the charging for same (interest) had to dwindle, then turn negative. And it has.

That wasn't a global Financial crisis, it was a 'planet cannot support growth expectation any more' crisis. So interest rates cannot go up. There isn't enough physical underwrite left.


Good analysis of the energy macros PDK. To extend that further, ask yourself what happens in nature when a natural system gets out of balance with the hard constraints of the natural environment? We can't expect the current system to continue for any meaningful amount of time, without the imbalances it is creating having a catastrophic outcome that rebalances the variables. Any economist would probably do better relating their models to a volcano or earthquake cycle, rather than any trends from the markets since the 70s when the gold standard was removed. The paradigm applies to mother nature and markets alike.


You fascinate me. I have been on this site for several years and cannot recall a post from you which differed in substance from this one.

Don't you get tired of saying the same thing endlessly? I would not disagree with the basic principle-that we are exceeding earth's resources and that by definition, that cannot go on indefinitely.

However, very recently you upped the ante by posting that a total systems collapse is now imminent, possibly by 2024, but presented no evidence to back that up. i think you are wrong. You greatly underestimate human ingenuity. We will not experience an oil shortage in the near future and while intensifying, the major consequences of climate change are some way off.

I did ask you what you have personally done to prepare for the collapse you predict. have you sold all your major assets? if not, why?

PDK is right, the whole world is going down the toilet and until that trend reverses, its pretty obvious its all going to end badly. The only thing in question is the timing. Is it a couple of years away or is it still as far out as 2050 ? While the world population continues to grow exponentially, we are doomed. Its not rocket science, the current way we carry on trashing the planet cannot continue indefinitely. The population in the world now needs to start declining, its probably already to late but its a start.

Maybe: been hearing that for the last 12 years now...

That's worst part. That can is completely destroyed after 12 years of kicking it down the road. Not much road left.

Interest rates won't go up. Or at least not by much.
I read a good quote the other day that in a fiat, ponzi system rates will gravitate towards zero and stay close to there.

Zollner believed cutting the OCR below zero was no longer necessary as a booming housing market had supported household spending and construction....

The power of bubble economics. Vote of confidence for her own paymaster, the central bank, and the govt.


Bank economists. Boring, and dare I say it irrelevant.

Our economy has required increasingly aggressive RBNZ intervention, even prior to the pandemic, to keep the CPI within target. Why would we believe that has changed in the longer term?

RBNZ, is independent.. all the sheeple in the ranks behave/lobbying the same when buzz word came around CAR, TD guarantee, DTI, LVR etc - all self preservation, the same call now for OCR - what so scared about of negative OCR? after all they've all passed stress test, right? or hmn, is it related to that...the usual bottom line profit? oh dear me..
C'mon Mr. Orr, listen to your team & your own guts, 11Feb govt new rule for L/Lord, soon hopefully the removal of bright line test, go ahead with that negative OCR, don't buy into those magical reports, which basically try to redirect the overall narrative headings. NZ must keep the current economic stimulus, with that we can see all the companies that have been assisted, reported a profit earning. So? the new stimulus should next be applied more for AirNZ, universities & all those empty hotel chains nationwide, NZ clearly need at least 40-50billions more of QE just to put the airline, Unis and the hospitality chains into profit earning reporting positions, courtesy of future tax payers, without significant 2021-25 stimulus NZ will lost it's magical pixie powder for rocket trust, you can softly injected the QEs into 'I'nsurance companies as well for climate change backup do gradual 'PR announcement' to strengthen Kiwi's assurances cover.

There is no end to Orr's depravity so negative interest rates are still a REAL possibility.

Real interest rates are negative anyway.. given this it seems the math-magicians at the RBNZ have indeed managed to reverse the 'time value' of savings. Such a miserable trick to play on savers.

The millstones of both Mortgage and National Debt repayments have been shackled to renters and the working poor. What land is this where the reaper overtakes the sower? Why invest your time and attention to such a s***-show?

Show us the money instead!!.. because the NZD (like many western currencies) seems to have become a wealth transfer device first.. a means-of-exchange second. Is the NZD simply now backed by serfs? Are serfs denied passports?

Real rates are what really matter, and as you say those are already negative. Nominal rates going negative is more headline grabbing though.

Shorten the headline:

Economists no longer see.

Except that isn't quite right either; they never did.

How about just:

Economists. No.

Or maybe Economists take wild stab in the dark - ask Metservice for guidance.

GC...Q: what do economists use for contraception?
A: their personality.

"Jeff Gundlach says stock market valuations are extraordinarily high, supported only by the Fed"
"Jeffrey Gundlach, founder and CEO of DoubleLine Capital, raised concerns Monday about the stock market’s elevated valuation relative to historical levels and believes rising inflation could upend investors this year."