NZ economy robust following OCR left on hold at 2.50%

11.19 NZST, Thursday 14 June 2012

NZ economy robust following OCR left on hold at 2.50%

By Andrew May (Sales Trader, CMC Markets New Zealand)

Outgoing Reserve Bank Governor Dr. Allan Bollard once again left the New Zealand official cash rate on hold at 2.50% and remarked it will inevitably stay there until at least January 2013.

Our economy is showing true signs of optimism care of the Auckland housing bubble burst. Banks are literally throwing money away at first time mortgagers and lowering the bench mark for borrowers. Inflation is well within the target 1-3% band for now and the foreseeable future, while strong credit card, retail and existing house sale figures and a prolonged, yet determined Christchurch rebuild effort are all assisting the local economic recovery.

Yet under this silver lining we're still heavily vulnerable to off shore circumstances and thus wait to see what will unfold over the ensuing European crisis and its detriment to our key trading partners.

But for now the RBNZ expect the 90day bill rate to remain at 2.7% until mid 2013 before rising 60 bpts to 3.3% by the end of 2014 implying the official cash rate will remain at 2.50%. Bears will not see a rate cut, more so the ever increased chance of a hike sometime mid next year.

The NZD remained sceptic upon the announcement firmly supported at USD 0.7760.
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