Economist Predict No Change to OCR

January 17, 2012 New Zealand Finance

CoinsExperts in both New Zealand and around the world are expecting the country’s Official Cash Rate to remain unchanged at its next review on January 26th.

According to the results of a survey recently conducted by Reuters, international economists are expecting the New Zealand OCR to be left at its current rate, due to the high levels of economic uncertainty around the world, and a lower than expected inflation rate in New Zealand.

Economist who participated in the survey indicated that New Zealand’s Consumer Price Index (CPI) only increased by 0.4 percent in the last three months of the year, and the annual inflation rate slowed to 2.6 percent from an a previously estimated level of 4.6 percent. Early indicators from the Reserve Bank suggest that inflation in the first quarter of 2012 is also expected to remain at approximately 0.4 percent. The Reserve Bank is expected to release the official inflation rate for the December quarter later this week.

Nick Tuffley, chief economist at ASB bank in New Zealand, said that if the currently expected inflation figures are correct, the Reserve Bank will be able to maintain the OCR at the current rate of 2.5 percent, as inflation is currently at an acceptable level. He added that the cash rate could even remain the same throughout all of 2012.

Dominick Stephens, chief economist at Westpac New Zealand, commented on the potential inflation levels in the near future, saying that food prices and the cost of telecommunications will fall in the first quarter of 2012. He also said that if the inflation figures remain as low as expected, the Reserve Bank will not raise the OCR in the near future.

Both economists suggested that the international economic condition at the moment were to uncertain, and the Reserve Bank could not make any large adjustments without more clarity.

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