Economists unanimous on next OCR move

Reserve Bank governor Alan Bollard is unlikely to change interest rates when he next reviews his official cash rate (OCR) on July 30.

Monday, July 13th 2009, 5:19AM

by Jenny Ruth

Midway from the last OCR review, for once economists are unanimous in expecting no change: all 11 economists Good Returns surveyed are of this view.

"Economic indicators have generally improved across the board so there's not much need to cut rates further for the time being and it's far too early to be worried about inflation," says Chris Worthington at Infometrics.

Jane Turner at ASB Bank says since Bollard last reviewed the OCR on June 11, when he left it unchanged at 2.5% after cutting it from 8.25% since July last year, there haven't been any big surprises in the economic data.

Bollard has said he intends to keep the OCR at or below current levels through to late 2010.

"In our view, the economic outlook remains quite weak. There are downside risks, particularly with the business sector under pressure," Turner says.

"The strength of the New Zealand dollar continues to make life difficult for exporters and will limit the extent of New Zealand's recovery."

Turner says Bollard still has scope to cut the OCR further down the track if necessary.

Brendan O'Donovan, chief economist at Westpac, says the latest survey of business opinion shows sentiment is starting to turn.

"Activity in the June quarter appears to have been falling at a slower pace," he says. "We expect the RBNZ to leave the cash rate on hold at 2.5% until the second half of next year, barring another downward lurch in the domestic and global economies or renewed turmoil in the financial sector."

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