OCR Predictions Lower
December 1, 2008 New Zealand Finance
Closer to the December Official Cash Rate (OCR) decision a progressively larger number of analysts are predicting a dramatic drop.
While argument may arise around exactly how much Reserve Bank Governor Alan Bollard will cut the OCR, no analysts are willing to vouch for any figure lower than 100 basis points, bringing the OCR to at least 5.5%.
Predictions for the December OCR cut range realistically between 100 to 200 basis points, with supporters on either side of the spectrum.
The biggest supporter of a 100 point cut amongst chief New Zealand analysts is Westpac Trust. In a statement released by Westpac Trust, they place their estimate on the lowering commodity prices of today’s market, the falling price of oil, lowered mortgage rates and the oncoming National Tax cuts. With this in mind they believe that a 100 point cut will be significant enough to maintain a viable economy until the next OCR review, in January.
ANZ analysts are vouching for a 150 point cut, similar sentiment is shared by the Deutsche Bank and Goldman Sachs. This prediction, according to statements made by ANZ, seemed to be more based on a seemingly worsening global outlook, pointing heavily to the deteriorating condition New Zealand’s key trading partners.
At the most extreme side of the scale, The New Zealand Manufacturers and Exporters Association (NZMEA), is predicting a 2% cut to the OCR, which would potentially lower the rate to 4.5%. NZMEA chief executive John Walley was quoted saying that similarly aggressive cuts by global banks could justify such a drastic action in the New Zealand environment.