• RBNZ expected to leave OCR on hold at 2.5%, but continue to highlight key tensions between housing market and NZD.
• Central bank voices increasing willingness to draw on the full array of policy instruments to address these challenges.
• We continue to expect the RBNZ to first lift the OCR in March 2014, as housing market pressures continue to rise
We expect the RBNZ to leave the OCR on hold at 2.5%, and continue to highlight the key tensions in the NZ economy: rising housing market pressures and the elevated NZD. These two forces make moving the OCR, either up or down, problematic. While the RBNZ is showing increasing willingness to draw on the fully array of policy instrumentts to address these policy challenges, the OCR remains the most effective tool available to the RBNZ for reducing housing market pressures. We continue to expect the RBNZ to first lift the OCR in March 2014 as housing market pressures continue to rise and inflation pressures start to lift.
Read the full report: Market Research
Commonwealth Bank