OCR Preview: Economists predict rates will hold

Economists say the Reserve Bank will keep the Official Cash Rate on hold next week, despite mounting global uncertainty and weak growth in New Zealand.

A total of 85% of economists who responded to TMM's OCR Preview Survey say the central bank's Monetary Policy will opt to keep the OCR at its current record low. 

The group of economists believe there is an outside chance rates could be cut, but say Adrian Orr and fellow MPC members will keep their powder dry for now. 

All respondents to our survey believe the OCR will drop further, with cuts in August predicted. Two economists say a further cut in November will take the OCR to 1%.

Amid escalating trade tensions between the US and China, and falling GDP in major economies, leading economists say the bank could point to increased risks to the domestic economy.

Jeremy Couchman, senior economist at Kiwibank, said: "The Monetary Policy Committee may decide to shift the language in the statement to an explicit loosening bias."

Robin Clements, an economist at UBS, also predicted a shift to "language likely interpreted as an easing bias ahead of August MPS". 

Christina Leung of NZIER says the RBNZ "will continue to leave door open to further easing, highlight importance of upcoming data".

Of the economists surveyed, only Michael Reddell, an independent, believes the Reserve Bank will pull the trigger on a rate cut. 

Reddell believes the forthcoming update on the government's Kiwibuild reboot will influence the central bank's thinking.

"The Bank's forecasts include quite a boost to demand from Kiwibuild, so whatever decisions are announced shortly about the KiwiBuild reboot might matter," Reddell added.

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