RBNZ leaves OCR on hold
As predicted, today the Reserve Bank of New Zealand left the official cash rate (OCR) at 5.5 percent as had been widely expected by many commentators, and even previously indicated by the RBNZ themselves earlier this year when it was announced that they would take a 'wait and see' approach for the balance of 2023.
However, it has not been the RBNZ that has been influencing mortgage lending rates over the last month or so, but the retail banks themselves.
We have seen a lift in all of the main banks’ one year fixed rates, currently the most popular nationally, and these are now well ensconced in the 7+ per cent range.
While it will be welcome news for many that the cash rate has not increased, for most it remains stubbornly high compared to recent years, particularly for those rolling off their fixed rates from 2020 and 2021.
What has added another dynamic to the decision making of the Monetary Policy Committee is the stabilising housing market, as prices nationally appear to have finished their downward slide.
If the recovery gathers pace, this will be a significant factor in their decision making in their next review on November 29.
Further complicating matters for the Reserve Bank will be the outworkings of the election on October 14, with the two main parties having differing views when it comes to the housing market.
Many are expecting that should a National led government be elected, it would see housing activity increase on the back of their residential foreign investment policy and interest deductibility phased reintroduction.
It is for this reason that many are suggesting that interest rates are set to remain at their current levels or even marginally increase for the foreseeable future.
From a global perspective, Ray White chief economist Nerida Conisbee said earlier this week that we are continuing to see rates on hold, however, many economies are navigating persistent inflation.
She said in the US, the Federal Reserve left interest rates on hold this month after inflation increased slightly but did warn that it would keep increasing if need be. Nevertheless, markets are expecting cuts to start towards the end of next year.
Ms Conisbee said surprisingly UK inflation was coming down, despite stubbornly rising power prices.
The Bank of England maintained rates, ending a run of 14 consecutive rate rises even though inflation remains a lot higher than other countries.
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