Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Wheeler to leave OCR unchanged as inflation stays benign

Wheeler to leave interest rates unchanged as inflation stays benign for now

Dec. 3 (BusinessDesk) – Reserve Bank governor Graeme Wheeler will probably keep the official cash rate unchanged at a record low this week because there’s little sign that renewed life in the housing market and Christchurch’s rebuild is stoking inflation yet.

Wheeler will leave the OCR unchanged at 2.5 percent on Thursday, according to all 12 economists in a Reuters survey. Looking out over the next 12 months, the median estimate is for him to begin hiking rates in the third quarter of 2013.

Some economists say he has room to cut rates in his first monetary policy statement since taking the bank’s helm. Recent figures have shown an unexpected decline in third-quarter retail sales, the unemployment rate has reached a 13-year high of 7.3 percent and inflation has slowed to a 0.8 percent pace – below the central bank’s target band.

Yet traders are betting on just an 18 percent chance of a cut this week, based on the overnight interest swap curve.

“An environment of weak near-term inflation would ordinarily prompt serious consideration of an OCR cut,” said Nick Tuffley, chief economist at ASB, in his preview of this Thursday’s monetary policy statement. But the rebuild of Christchurch and “increasingly heated state of parts of the housing market” suggests that “the medium-term outlook for inflation is not nearly as benign as the current headline rates.”

Wheeler may be in no rush to move on interest rates with the New Zealand dollar staying stubbornly high and above the Reserve Bank’s forecast track on a trade-weighted basis. The TWI was recently at 73.41 and is set to close out the fourth quarter at a higher average level than the 72 forecast in the central bank’s September MPS, keeping a lid on imported inflation.

He will also be concluding his review with no clear sign that the US Congress will find a way to avoid the fiscal cliff that would start on Jan. 1, stalling the world’s biggest economy. And while there is progress on aid for Greece, the euro region’s woes are wider and will take longer to resolve.

“Global economic sentiment has improved slightly, but the RBNZ will probably refer to the fragility of the situation and the dangers of the US fiscal cliff,” said Dominick Stephens, chief economist at Westpac Banking Corp.

Stephens expects the forecast track for the 90-day bank bills to be broadly unchanged from the September MPS and “the main messages will be similar to previous missives.”

The 90-day bill rate was last at 2.67 percent and has tracked in a range of 2.63 percent to 2.74 percent since the start of June. The September MPS has the 90-day rate averaging 2.7 percent for the next three quarters.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: RBNZ Starts Talks On Tougher Rules For Property Speculators

The Reserve Bank of New Zealand is stepping up preparations to restrict lending to residential property investors as it watches house prices, particularly in Auckland, continue to rise strongly. More>>

ALSO:

Research: ‘Ageing Well’ Science Challenge Launched

Science and Innovation Minister Steven Joyce today launched the Ageing Well National Science Challenge, confirming initial funding of $14.6 million. More>>

ALSO:

Scoop Business: Govt Resisting Pressure To Pump More Cash Into Solid Energy

Prime Minister John Key says it is “not the government’s preferred option” to make a fresh capital injection into the troubled state-owned coal miner, Solid Energy, but dodged journalists’ questions at his weekly press conference on whether that might prove necessary... More>>

ALSO:

Lagest Ever Privacy Breach Award: NZCU Baywide Accepts “Severe” Censure In Cake Case

NZCU Baywide says that once it was found to have committed a breach of a former staff member’s privacy, it had attempted to resolve the matter... the censure and remedies for its actions taken almost three years ago are “severe” but accepted, and will hopefully draw a line under the matter. More>>

ALSO:

Scoop Business: PayPal Stops Processing Mega Payments; NZX Listing Still On

PayPal has ceased processing payments for Mega, the file storage and encryption firm looking to join the New Zealand stock market via a reverse listing of TRS Investments, amid claims it is not a legitimate cloud storage service. More>>

ALSO:

Housing Policy: Auckland Densification As Popular As Ebola, English Says

Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news