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Bollard May Need To Go Lower Than 2.5
Media Comment
29TH April 2009
Bollard May Need To Go Lower Than 2.5 But Can He Afford To?
Sargon Elias,
general manger, CMC Markets New Zealand expects Reserve Bank
Governor Allan Bollard to cut the OCR rate by 50bp but
believes what will be of greater interest will be his
commentary around the announcement.
“If the OCR is cut to 2.5bp as most people expect then he is at the bottom of the range he indicated he wanted to go. However the economy remains sluggish so he may have to go lower next time and that raises the questions whether he can afford to.
“Australia’s rate is currently sits at 3% and if we fall too far below that Australia will attract the money from overseas investors as there will be no incentive to send money to New Zealand and that will make it tough for our banks.”
“Bollard is in an interesting positioning which is why the commentary around the cut will be of greater interest to the markets than the actual cut itself,” concluded Elias
Ends
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