13 May 2019 |
Change of OCR Call
Late Friday afternoon Dominick and Westpac Economics team released their latest forecast for the RBNZ OCR. The major change being the removal of another cut mid-2020, meaning the OCR is now on hold for some time until mid-2022, with the next move being a hike.
Dominick’s summary points are below with the full paper attached for those interested in the full read.
- Today we are reaffirming our forecast that the RBNZ will keep the OCR on hold at 1.5% for the remainder of 2019.
- This is a finely balanced call. A follow-up cut is possible if the data weakens further.
- But as we said on April 3, we expect an economic pickup later this year to remove thoughts of another OCR cut.
- Previously, we thought that the introduction of capital gains tax (CGT) would prompt an OCR cut in 2020.
- But the Government has cancelled CGT. That, combined with low mortgage rates, has seen us shift to forecasting 7% house price inflation next year.
- Under such conditions, we no longer see a rationale for cutting the OCR in 2020.
- We are now forecasting no change in the OCR until mid-2022.
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