GDP surprise to hold back OCR increase

Now economists are all on the same page with the next Official Cash Rate (OCR) increase not expected until March 2011 and with long term fixed rates expected to go lower.

GDP figures showed the economy grew just 0.2% in the June quarter as seen in this graph. Market expectations were centred around 0.8% growth and the Reserve Bank was expecting 0.9%.

ASB says if the Reserve Bank waits till March next year as expected then it will have another six months to allow the economy to strengthen and to better assess the earthquake disruption.

The only lender to change mortgage rates this week was FinanceDirect. It made changes to all but its one-year home loan rates.