However, RBNZ could expand quantitative easing programme to control interest rates
Economists believe that the Reserve Bank of New Zealand (RBNZ) will keep the official cash rate (OCR) at its current level in August, according to the latest survey by TMM Online.
According to the survey, a whopping 100% of the respondents expect the OCR to remain at 0.25% this month. However, they also pointed out the possibility that the RBNZ would expand its quantitative easing programme to control interest rates.
“The RBNZ's LSAP [large scale asset purchases] programme has been successful to date. But the government has only just begun to expand its balance sheet and bond issuance program,” said Kiwibank chief economist Jarrod Kerr, as reported by Good Returns.
“The RBNZ has plenty more bonds to buy. The LSAP program is likely to be lifted from $60 billion towards $100 billion. And we think the program will ultimately end up near $120 billion in coming years.”
Read more: Westpac economists predict negative OCR in April 2021
Despite the predictions that the OCR would remain at its current level this month, economists and other experts predict that it would enter negative territory next year.
“We expect the Reserve Bank will take the OCR negative by mid-2021 once retail banks are able to implement a lower rate,” said Infometrics senior economist Brad Olsen, as reported by Good Returns.
“However, we expect to see the Reserve Bank make it clear publicly ahead of this move, what its preference is between a lower OCR and an expanded LSAP programme, which will provide us with greater direction as to the likelihood of the move.”
