RBNZ's Wheeler keeps OCR at 1.75% on positive outlook

Reserve Bank governor Graeme Wheeler

Graeme Wheeler does what is expected with the OCR - that is, nothing - and isn’t worried about recent soft GDP numbers

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Reserve Bank governor Graeme Wheeler kept the official cash rate unchanged at 1.75 percent, as expected, and reiterated his view that the benchmark rate doesn't need shifting for the foreseeable future. 

"Monetary policy will remain accommodative for a considerable period," Wheeler said in a statement. "Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly." 

Last month the Reserve Bank adopted a neutral stance on policy, signalling the OCR would go nowhere until the middle of 2019, while acknowledging risks in the housing market and US President Donald Trump's protectionist trade measures could change the outlook. 

Wheeler reiterated those concerns, saying "major challenges remain with on-going surplus capacity in the global economy and extensive geopolitical uncertainty". 

Economists aren't convinced the Reserve Bank will sit on its hands for another two years, with many predicting an increase in the cash rate next year as inflationary pressures emerge. However, none of the 11 polled by BusinessDesk were predicting a move today, with last week's gross domestic product figures showing the wet spring weighed more heavily on economic growth than expected. 

Wheeler today said December growth was weaker than expected, but that was in part due to temporary factors and the outlook was still positive due to "on-going accommodative monetary policy, strong population growth, and high levels of household spending and construction activity". He reiterated his view that the consumers price index is expected to head to the bank's 2 percent mid-point target over the medium and said long-term inflation expectations was anchored around that level. 

The kiwi has dropped 2.9 percent against the greenback since the February review and was trading at 70.64 US cents from 70.50 immediately before the release. The trade-weighted index has dropped about 3.8 percent and was at 76.53 from 76.40, below the 79 average level expected for the first quarter.

Wheeler noted the decline since February as "encouraging" but said "further depreciation is needed to achieve more balanced growth". 

(BusinessDesk)


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6 Comments & Questions

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Rates are going up dummy. Time to do the same.

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Rates are going up without the RB doing anything, dummy.

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Rates will never be held at record low on "positive" outlook. Wheeler is afraid that a 25 bps hike in rates could afflict a great deal of damage on mortgage repayments.

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They're still too low, dummy.

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Next move will be down, not a widely-held position I know. There will be little to no reason to raise rates any time soon and in the interim there will be another 'financial accident' on the global markets that will throw everything into pandemonium again. Long-running currency crises and monetary instability has never resolved without major shifts in the social contract, at present most Western governments are bankrupt due to extremely socialistic policy settings.

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Low rates haven't done much good for the housing market unless you are a speculator or investor not a first home buyer.

They haven't done much good for the aging population who only have Nat Super plus a modest amount of TDs interest to live on given galloping rates especially under the Auckland Council morons.

When the money tide goes out and rates rise many will be underwater and many will be found to be swimming naked.

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