OCR Cut Down to 3%

March 12, 2009 International FinanceNew Zealand Finance  No comments

The Official Cash Rate (OCR) of New Zealand has been cut to 3%.

The Reserve Bank has taken an expected move and once again cut the New Zealand OCR by 50 basis points, bringing it to 3%, from its previous position of 3.5%.

At first glance, the move is a relatively small one, especially since it has been preceded by numerous previous cuts, many of a much greater magnitude. The smaller cuts were driven by the Reserve Bank’s relatively positive future outlook for the New Zealand economy.

It seems that many economists were counting on a higher cut, the level of the New Zealand dollar reflects the fact that a higher cut was expected. Before the announcement, the New Zealand dollar was trading at US 0.5080c, post announcement it was at US 0.5120c. This could also be attributed to the unexpectedly optimistic speech and predictions for the economy made by Alan Bollard during he cut announcement.

At the moment, initial economic predictions for the April and June OCR revisions will be at 25 basis points each, unless the economic situation changes heavily.