Reserve Bank releases OCR announcement

The Reserve Bank has published its June OCR decision

Reserve Bank releases OCR announcement

The Reserve Bank of New Zealand has announced that the Official Cash Rate (OCR) remains unchanged at 1.5%. It has indicated that a lower OCR may be needed over time, given the weaker global economic outlook and the risk of ongoing subdued domestic growth.

The OCR was lowered to 1.5% in May, a record low cash rate after sixteen consecutive months of it remaining unchanged at 1.75%. Economists currently predict a further drop in August to 1.25%.

Growth has slowed over the past year while construction activity strengthened in the March 2019 quarter, and growth in the services sector has continued to slow. Softer house prices and a declining business confidence have continued to dampen domestic spending.

The Reserve Bank says that the global economic outlook has weakened, thus intensifying risks in relation to trade activity. A number of central banks are easing their monetary policy settings to support demand, and the weaker global economy is affecting New Zealand through a range of trade, financial, and confidence channels.

“We expect low interest rates and increased government spending to support a lift in economic growth and employment,” the Reserve Bank stated. “Inflation is expected to rise to the 2 percent mid-point of our target range, and employment to remain near its maximum sustainable level.”

“Given the downside risks around the employment and inflation outlook, a lower OCR may be needed.”