Businesses Waiting for Banks to Respond
Businesses Waiting for Banks to Respond to Lower Interest Rates
Banks must pass on lower wholesale interest rates if today’s cut in the official cash rate is to be effective according to the Wellington Regional Chamber of Commerce.
“Businesses will be pleased that the Reserve Bank has reduced the official cash rate by another 0.5% and will be watching closely to see how banks respond,” said Chamber CEO Charles Finny
“Businesses are telling us that banks have been slow to pass on the reductions in wholesale rates since they started falling in July 2008.
“A recent Chamber survey shows that 50% of businesses say their banks have not matched the reduction over this period, 48% say they have and 2% say they have exceeded OCR cuts.
“The Reserve Bank was quite clear in its statement today that interest rates are expected to remain low throughout the year and into 2010 so banks must take this on board when setting their rates.
“We are pleased some banks have already responded and urge the rest to act immediately in this regard.
“Obviously banks will need to be prudent in their lending and some discretion is to be expected for some business propositions, but over all lower costs must be passed on.
“Increased business investment will be the key to the economic recovery. It is crucial that lower interest rates are passed on to businesses for this to occur and to give economic activity a boost,” Mr Finny concluded.