Reserve Bank springs surprise with dovish OCR forecast
The Reserve Bank was widely expected to keep rates at a record low, yet market economists were taken off guard by the central bank’s language. Governor Adrian Orr hinted at a softer outlook for the New Zealand economy, following a sustained period of weak economic growth. The bank continued its neutral stance on whether the OCR would move "up or down", a stance Orr said was supported by "more balanced risks".
Imre Spiezer, head of NZ Strategy at Westpac, said the OCR forecast change to 2020 had sprung a “dovish surprise to markets”.
Westpac’s Dominick Stephens said the forecast change was “predictable” as he “never thought growth could live up to the hype the Reserve Bank expected”. He added: “We expected a degree of reaction but the question we are asking now is, are they overreacting? We don’t think GDP growth will be as weak as they say in the near term.”
The Reserve Bank said its decision to push back OCR rate forecast had been partly informed by delays in the Kiwibuild scheme. The Reserve Bank said the delays would likely push back GDP growth and inflation.
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