Outlook for borrowers: September update
NZ interest rates have declined to new lows for the cycle against a backdrop of weak domestic activity and expectations that inflation will return to target over the medium term. The dovish pivot by the Reserve Bank of New Zealand (RBNZ) at the August Monetary Policy Statement (MPS) was the initial catalyst for the move lower. Recently, weak GDP data for the June quarter raised concerns about the contours of the economic recovery and contributed to a further leg lower in rates across the yield curve.
Outlook for Borrowers: Post August MPS
The Reserve Bank of New Zealand (RBNZ) reduced the Official Cash Rate (OCR) by 25bp to 3.0% at the Monetary Policy Statement (MPS) on Wednesday. The rate cut was expected by economists and was close to fully discounted by pricing in the overnight index swap (OIS) market. However, the decision was reached by a 4-2 majority. The dissenting Committee members preferred to reduce the OCR by a larger a 50bp adjustment.