Further OCR Cut Likely

November 5, 2008 New Zealand Finance  No comments

Predictions are arising of a 75 point cut to the New Zealand Official Cash Rate.

According to predictions made by ANZ economists, Reserve Bank governor Alan Bollard will cut the New Zealand Official Cash Rate (OCR) by 75 points at the next Reserve Bank meeting, on the 4th of December. The prediction follows an announcement on the 4th of November by the Australian reserve Bank that it is cutting its OCR by 75 points, from 6% to 5.25%.

According to the ANZ, it can be expected that the New Zealand Reserve Bank will follow suit and lower its rate by a similar amount, due mostly to the fact that the factors influencing inflation, growth and the business environment are similar enough to be comparable between both countries.

There is little argument amongst analysts on the topic of whether a cut will be announced in December, contention only arises on the issue of how large the cut will be. Some bank representatives expect a cut of only 50 points, while others like ANZ anticipate a more aggressive fall of 75 points. There will be one more meeting of the Australian Reserve Bank on December 2nd, in which it is expected that an OCR cut of 50 points will occur. It is likely that closer to the time, the likelihood of this occurring will lend credence or doubt to the situation in New Zealand.