Westpac drops negative OCR call

The team's economists believe the OCR is now "low enough", given the rip-roaring housing market and recent strong GDP data. 

The bank's forecasters, led by Dominick Stephens, join ASB and ANZ in their U-turn on negative rates. The team previously predicted the OCR would drop to -0.25%.

Consensus across the market suggests the Reserve Bank will either keep the OCR at 0.25%, or make a 15 basis point cut this year. 

Westpac says the OCR will be "on hold for the foreseeable future", with low inflation and high unemployment. 

Stephens said, "Developments over the past month or so have called into question the degree of monetary stimulus that will be required. The OCR needs to stay low, but we no longer expect that it will need to go lower."

Westpac cited record growth in the housing market as the main reason for its change in forecast. 

"The impact of monetary policy on house prices has proven far more potent than the RBNZ anticipated. Now is a time for the RBNZ to sit back and observe how the stimulus it has provided translates from house prices to the economy and then to inflation, rather than to cut further. It just does not seem likely that the RBNZ would cut the OCR amid 20% house price inflation."