ANZ picks OCR cuts to stop at 0.1%

New Zealand’s largest bank no longer expects the official cash rate to be cut below zero, saying a booming housing market and a new scheme to lower borrowing rates are making the move unnecessary. ANZ officially changed its forecast for the OCR yesterday, predicting that while the Reserve Bank would instigate another cut this year, it would lower the benchmark rate only marginally, from 0.25 per cent to 0.1 per cent, a new record low.

While through 2020 most forecasters expected the OCR to be cut below zero for the first time, expectations of cuts dropped sharply in November when Finance Minister Grant Robertson called on the Reserve Bank to work with it to help improve housing affordability. ANZ chief economist Sharon Zollner said that the experience of recent months showed that, despite drawbacks, the impact of sharply lower interest rates had worked.

“The housing market has boomed, defying widespread predictions of a bust. While exacerbating wealth inequality and worsening housing affordability, this has supported household spending and construction, and thereby employment and inflation.”

ASB has already dropped its prediction that the OCR would be cut below zero. — NZME