‘En­joy the low rates . . . while they last’

Weekend Herald - - Front Page - Liam Dann

En­joy the mort­gage war while it lasts. Global fi­nance gi­ants Gold­man Sachs and No­mura aren’t buy­ing in to the busi­ness gloom and both say rates will rise sooner than most lo­cal fore­casts.

Gold­man Sachs says “the strength in New Zealand’s hard data means the chance of a 2019 rate hike are in­creas­ing,” Bloomberg News has re­ported.

A Syd­ney-based strate­gist with Ja­panese bank No­mura is pick­ing the kiwi dol­lar — which rose sharply this week af­ter strong em­ploy­ment data — will rise fur­ther in com­ing months.

No­mura’s An­drew Tice­hurst wrote in a re­search note: “We con­tinue to think the next move in the of­fi­cial cash rate is up and main­tain our fore­cast for a 25 ba­sis­point hike in the fourth quar­ter of 2019.”

Both calls are more up­beat than the Re­serve Bank it­self which yes­ter­day de­liv­ered its lat­est Mon­e­tary Pol­icy State­ment. It said it ex­pects the of­fi­cial cash rate to stay on hold at 1.75 per cent into 2020. The rate has al­ready been on hold for two years.

That sta­bil­ity has cre­ated a win­dow for a lo­cal bank min­i­mort­gage war — drop­ping their rates even as the global cost of bor­row­ing rises. In­ter­est rates and the value of the dol­lar are in­ti­mately con­nected as global traders favour coun­tries with higher rates.

Af­ter years of low in­fla­tion the Re­serve Bank has taken a cau­tious ap­proach. Lo­cal econ­o­mists say the lack of in­fla­tion has taken pres­sure off the bank to lift rates in a hurry de­spite con­tin­ued strength in the econ­omy.

Weak busi­ness con­fi­dence has been the most neg­a­tive eco­nomic sig­nal this year but has thus far not trans­lated into slower growth or higher un­em­ploy­ment.

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