RBNZ to replace 90-day bank bill projection for track of OCR
Tuesday 25 October 2016 10:08 AM
RBNZ to replace 90-day bank bill projection for track of OCR starting in November statement
By Jonathan Underhill
Oct. 25 (BusinessDesk) - The Reserve Bank will replace its projection for the track of the 90-day bank bill rate with one for the official cash rate, saying the 90-day rate is no longer a clear signal for the direction of interest rates.
"Historically the 90-day bank bill rate has provided a good gauge for the stance of monetary policy because it typically moves in a consistent manner with the OCR," the bank said in a statement. "Variations in the past have generally been temporary and experienced during periods of financial stress. More recently, regulatory changes in global financial markets have also been altering the relationship between the 90-day bank bill and OCR, complicating the bank’s communication of the monetary policy outlook.'
Publishing a track for the OCR is "a more transparent way of presenting the expected policy actions needed to achieve (the bank's) inflation target," it said. The switch doesn't imply any change to the way monetary policy is conducted. "As with previous 90-day rate forecasts, projections for the OCR are conditional on the bank’s assessment of current economic conditions and assumptions about the future evolution of the New Zealand economy."
The August monetary policy statement had the 90-day rate falling to 1.8 percent in the second quarter of 2017, from an average 2.4 percent in the same quarter this year.