NZ OCR Slashed by 1.5%

December 4, 2008 New Zealand Finance  No comments

On the 4th of December the Reserve Bank of New Zealand cut its Official Cash Rate by 1.5%, reducing it to a level of 5% from its previous 6.5%.

The change was announced by Reserve Bank Governor Alan Bollard on the morning of the cut. The news was justified by the Reserve Bank’s worsening view of upcoming economic situations. Specifically, it was quoted that the Reserve Bank does not expect a respite in the recession until mid-2009 and a below average economic trend until at least 2010.

The new OCR is the lowest it has been since it was at the same level at the beginning of 2005. Since the July of 2008, the OCR has dropped by 3.25%

The level of the OCR cut fits with the general trend of predictions made previously. This figure was specifically endorsed by Deutsche Bank and Goldman Sachs and further supported by the Australian OCR cut on the 2nd of January.

Economist and analysts are already predicting the next fall in the Official Cash Rate
In response to the OCR cut, banks have begun reducing their lending rates accordingly. At the time of writing ASB, SBS, Kiwibank, BNZ and Westpac had all reduced their floating mortgage rate. Of the major banks, only ANZ had yet to make an action in regards to the Reserve Bank OCR decision.

Almost in consensus, BNZ and ANZ spokespeople today said that a end of 2009 OCR of 4%-3.5% was conceivable. Further, ANZ had made a January OCR prediction of a 100 basis point cut, followed by another 50 in March.