ASB economists expect OCR to remain unchanged until 2022

Economists’ official cash rate (OCR) predictions turned out to be correct as the Reserve Bank of New Zealand (RBNZ) recently decided to keep the OCR at its current level. Now, ASB economists expect that the OCR will remain at its current level until 2022.

Economists revealed in ASB’s Economic Weekly report that they no longer expect a 25bp cut for the rest of the year as New Zealand’s economy continues to be reasonably well placed. With the central bank showing a small reluctance to move settings due to increased fiscal stimulus, it would not be surprising if the OCR would remain unchanged until 2022.

“We now expect the OCR to remain at 1.00% until 2022, followed by a series of mild OCR hikes and a 2.25% endpoint this cycle. We also have edged up our other NZ Interest rate forecasts accordingly,” the economists wrote on ASB’s Economic Weekly report.

They also noted the possible short-lived impact of the coronavirus outbreak on the economy, saying: “If the coronavirus outbreak turns to have longer-lasting impacts globally or if it reaches NZ, the economic hit to NZ would be greater, and the OCR would likely move lower.”

“Moreover, we remain sceptical that the NZ economy will accelerate to the degree that the RBNZ expects from the June quarter of this year.”

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