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

 

Economic Update: RBNZ Says Rate Cut Seems Likely

The Reserve Bank will likely cut interest rates further as a persistently strong kiwi dollar makes it difficult for the bank to meet its inflation target, it said. The local currency fell. More>>

ALSO:

House Price Action Plan: RBNZ Signals National Lending Restrictions

The central bank wants to cap bank lending to property investors with a deposit of less than 40 percent at 5 percent and restore the 10 percent limit for owner-occupiers wanting to take out a mortgage with a deposit of less than 20 percent, according to a consultation paper released today. More>>

ALSO:

Sparks Fly: Gordon Campbell On China Steel Dumping Allegations

No doubt, officials on the China desk at MFAT have prided themselves on fashioning a niche position for New Zealand right in between the US and China – and leveraging off both of them! Well, as the Aussies would say, of MFAT: tell ‘em they’re dreaming. More>>

ALSO:

Loan Sharks: Finance Companies Found Guilty Of Breaching Fair Trading Act

Finance companies Budget Loans and Evolution Finance, run by former 1980s corporate high-flyer Allan Hawkins, have been found guilty of 106 charges of breaching the Fair Trading Act for misleading 21 borrowers while enforcing loan contracts. More>>

ALSO:

Post Panama Papers: Govt To Adopt Shewan's Foreign Trust Recommendations

The government will adopt all of the recommendations from former PwC chairman John Shewan to increase disclosure and introduce a register for foreign trusts with new legislation to be introduced next month. More>>

ALSO:

The Price Of Cheese: Cheddar At Eight-Year Low

Food prices decreased 0.5 percent in the year to June 2016, influenced by lower grocery food prices (down 2.3 percent), Statistics New Zealand said today. Compared with June 2015, cheese prices were down 9.5 percent, fresh milk was down 3.9 percent, and yoghurt was down 9.2 percent. More>>

ALSO:

Financial Advisers: New 'Customer-First' Obligations

Goldsmith plans to do away with the current adviser designations which he says have been "unsatisfactory" in that some advisers are obliged to disclose potential conflicts of interest and act in their customers' best interests, but others are not. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news