Early economic indicators turned out better than economists expected
As New Zealand returns to normality following the COVID-19 lockdown, BNZ economists now expect a “straightforward” official cash rate (OCR) hold next month.
The BNZ economists noted stable electronic payment transactions and house price increases, reflecting a “decent pickup in activity.” Therefore, the Reserve Bank of New Zealand (RBNZ) would most likely hold the OCR in August.
“At face value, the case for the RBNZ to hold policy steady at its August Monetary Policy Statement appears quite straightforward,” said BNZ research head Stephen Toplis, as reported by Good Returns.
“The balance of developments since its previous May projections has tended to be on the better side of expectations.”
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Meanwhile, Kiwibank economists said “shock” COVID-19 outbreak could force the central bank to drop the OCR below zero, with the worst-case scenario being a 75 basis point cut to -0.50%.
Kiwibank chief economist Jarod Kerr predicts that the RBNZ would continue implementing its quantitative easing programme unless conditions change. He also expects steady wholesale swap rates in 2021, near 0.25% as “the RBNZ's on-hold guidance likely extends into 2022.”
