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NZ money - Source: ONE News -
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ASB economist Jane Turner says the Reserve Bank appears to be resigned to the fact the Kiwi dollar and longer term interest rates are higher than desired.
Reserve Bank governor Alan Bollard on Thursday announced that the official cash will stay at 2.5% where it has been since a 0.5% cut in April.
"While verbally the RBNZ maintained its easing bias, their 90-day forecast does not actually incorporate another cut. The RBNZ may think it has done enough for now and the threshold for further cuts is now higher," Turner says.
ASB expects the Reserve Bank's expectations that the Trade Weighted Index will fall to 52 cents from where it currently sits at 59.7 is unlikely.
As a result, ASB expects the central bank will feel the downside later in the year and will cut the OCR by 0.25% in September and October, taking it to 2.0%.
