The Reserve Bank (RBNZ) is leaving the official cash rate (OCR) on hold at 1.5%.
However, RBNZ dropped a big hint of another cut in the coming months.
The decision to leave the OCR on hold at 1.5% was a decision that had been previously decided, leaving people no choice but to accept it, says CoreLogic senior property economist Kelvin Davidson.
“Given the tendency to only change it when the formal monetary policy statement (MPS) rolls around every 12 weeks, as well as the fact that the previous cut was only made six weeks ago,” Davidson says.
“The committee will be wanting time to assess how that cut is affecting the economy (and housing market before moving again.”
Davidson says the statement says due to the softer outlook for offshore and domestic economic growth, a lower OCR may be needed over time to continue to meet our objectives.
The timing for the next rate cut may be as soon as August 7.
“On balance, we wouldn’t anticipate a huge boost to either sales activity or property values from any further OCR cuts,” Davidson says.
Mortgage interest rates are low, and Davidson says banks will start to prepare for holding more capital on their balance sheets from November.
“Not pushing a full OCR cut through to lending rates is clearly one way to start doing this.”
Davidson says the low mortgage rates will help to underpin housing market activity and prices for a while, especially when combined with a low unemployment and a slowly but still-growing economy.
The latest mortgage lending figures are expected to be released on June 27 and the QV House Price Index for due on July 2.
