WELLINGTON: The Reserve Bank is signalling record low interest rates, despite maintaining that house prices increases remain “excessive”. On Thursday morning Reserve Bank governor Graeme Wheeler left the benchmark official cash rate (OCR) unchanged at 2 per cent. While banks do not offer products at the rate of the OCR, it generally has a direct influence on mortgage and deposit rates.
Wheeler’s statement was very similar in tone and language to his last interest rate review in August, which left bank economists predicting that he will cut the OCR to 1.75 per cent in November, then possible again in February.
In his one page statement, Wheeler maintained his stance that house prices were increasing too quickly, posing a risk for the health of the banking sector. But he hinted that tighter rules for property investors, as well as banks finding it harder to borrow money, may soon cause this to slow. “There are indications that recent macro-prudential measures and tighter credit conditions in recent weeks are having a moderating influence,” Wheeler said in a statement.
The Reserve Bank governor also argued the New Zealand remained too strong and “needed” to come down, even though export prices had bounced back since the start of August. The bank assumed that “further” cuts to interest rates would be required in a bid to weaken the dollar and stoke inflation.
