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Two more OCR cuts this year: ASB

ASB bank has accelerated its forecast for further Official Cash Rate cuts amid weak business confidence data.

Thursday, July 4th 2019, 12:13PM

ASB economists now predict rate cuts in August and November, after NZIER's quarterly business confidence survey underlining weakened economic activity. 

Previously, the bank tipped an August cut, with rates on hold for a long period after.

ASB says this week's business confidence survey is further evidence the Reserve Bank will need to cut rates to give the economy a boost. 

Senior Economist Jane Turner said: "There is evidence to suggest that falling profit margins are now impacting employment demand, and the risk is that a weaker labour market may result in the economic slowdown becoming more entrenched.

"We now expect the RBNZ to cut the Official Cash Rate twice more this year, in August and November, bringing it to a new record low of 1%," Turner added.

Turner believes a cut in August is a "done deal", and the timing of the second cut will depend on data released until that point. 

It comes after Australia's Reserve Bank cut interest rates to 1% on Tuesday. Reserve Bank officials there have called for the government to intervene to prop up the economy. 

The trends point to a prolonged period of low interest rates, with major banks, smaller lenders and non-banks slashing rates in New Zealand this year. Take a look at our rates table here.

 

Comments from our readers

On 4 July 2019 at 2:56 pm KiwiInvestor said:

All fine and well the RBNZ cutting cash rate to historic low, BUT will the Banks pass on the reduction in full, as up until now, some are not passing this reduction on to borrowers!!!

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