OCR reaction: cut less likely and rates to stay low
The Reserve Bank kept the OCR at the record low of 1.75% this morning as widely expected, and also kept its forecast of a rate rise in 2020 unchanged. Yet there were a few subtle changes to the bank's language, with no reference to the rate moving "up or down".
As a result, economists and analysts believe the central bank is slightly more hawkish on the OCR track, but predict mortgage borrowers will enjoy low rates through 2019 and into the following year, as economic growth remains soft and downside risks remain.
The announcement comes off the back of an unexpected drop in unemployment, and rising inflation, spurred by increased petrol prices. Economists believe the likelihood of a rate cut has fallen due to the trends.
CoreLogic senior analyst Kelvin Davidson said the MPS was notable due to the absence of "up of down" language, used in the August statement. He said: "It may have already been absent prior to yesterday’s labour market data, but whatever the case, the drop in the unemployment rate has now seemingly taken a near term rate cut off the table."
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