Businesses holding up OCR cuts
Independent economist Tony Alexander says just as the Reserve Bank monetary policy over-loosened during and post the pandemic, it has now over-tightened and at some point it will cut interest rates rapidly. His best guess is just before the end of this year.
“Before then the RBNZ will hold out with minimal comment for as long as it can with good justification for doing so because of one central thing. “Businesses are still planning to raise their selling prices and have yet to completely capitulate to the altered economic environment.”
He says householders, particularly those with mortgages, are doing their part in drastically cutting back spending. The central government is as well. Councils are not and neither yet are businesses. “The ball essentially is in their court. Customer demand won’t come back until they give in.”
The longer businesses take, the worse will be this end-game period for monetary policy tightening, Alexander says.
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