ASB joins Westpac in picking Official Cash Rate to remain on hold at 3% until September
ASB economists have joined Westpac in picking the Reserve Bank of New Zealand to keep Official Cash Rate on hold at 3% until September, instead of June, this year.
In a comment piece titled 'Don't hurry, be tardy', ASB chief economist Nick Tuffley said economic growth had now markedly undershot the RBNZ's expectations. With inflation pressures weaker than anticipated, the RBNZ could afford to hold, Tuffley said.
"Moreover, the economy has proved to be less responsive to low interest rates than the RBNZ had anticipated," Tuffley said.
"This latter reflection, in particular, triggered a far more cautious attitude in December to further OCR increases. We expect the RBNZ will want to be much more certain than usual that economic recovery is entrenched before it resumes lifting the OCR," he said.
“Our outlook for the OCR is 25bp increases at the September and December 2011 MPS releases, followed by consecutive increases at each meeting from March 2012 through to July 2012, with the OCR peaking at 4.5%,” Tuffley said.
Figures released by Statistics New Zealand just before Christmas show the economy shrank 0.2% in the September quarter last year, which was below economist expectations of a 0.2% rise. However, the New Zealand Institute of Economic Research this week said it did not think the economy would shrink again in the December quarter.
Today's comments from ASB follow weak electronic card transaction figures for December, which showed the value of total card transactions fell 1.2% from November.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.