“Real” risk of OCR cut: Westpac
The Reserve Bank surprised the market last week by signalling it may not raise the OCR rate until September 2020, due to slow economic growth. The central bank continued to suggest the OCR could move “up or down” depending on the strength of the economy and inflation figures.
Westpac economists, led by Dominick Stephens, believe the Reserve Bank’s interest rate projections “have made clear the extent to which the ‘down’ scenario is a real prospect”. The economists said they were “taking seriously the possibility of a rate cut within the next year, and we think that financial markets should too”. The bank says financial markets currently place a 20% probability on a rate cut within the next year.
Westpac says the Reserve Bank’s downside scenario of slower GDP growth could see it fall short of inflation and employment targets, warranting a “substantially lower OCR”.
The economists said the potential for a rate cut was “reinforced” by RBNZ assistant governor John McDermott last week. In an interview, McDermott said the central bank had been “been pushed nearer to that trigger point”, adding he needed to see stronger September GDP figures to be convinced “it is on the right track”. Westpac said the comments indicated “the risk of an OCR cut is real, but not imminent”.
Click the button below to subscribe and will have free unlimited access for a limited time to full article and all other articles on the site.
You will also be able to comment on articles on Good Returns.
![[The Wrap] What the heck is happening at the FMA?](https://goodreturns.publit.io/file/c_fill,w_300,h_200/a6c3bc06-6401-44de-96e2-286c090e132d.jpg)
