RBNZ Sticks to its Guns

The Reserve Bank (RBNZ) has stuck to its guns and increased the official cash rate (OCR) by 25 basis points to 2.75 per cent.

The RBNZ has been indicating for most of 2010 that it would start to remove the policy stimulus of very low cash rates ‘from mid-2010’.

The increase has gone ahead despite some financial turmoil in European markets, and, closer to home, an announcement in the annual Budget that the GST will be increased.

In the statement following the announcement yesterday, the RBNZ governor, Alan Bollard, said growth in Asia and Australia, and the recovery in the US, has helped to boost export value. The local labour market, and residential property and business investment, have also been positive.

Borrowers should expect further increases to the official cash rate, but thanks to increased cost of funding for lenders and an increase in the number of New Zealanders on floating rate mortgages, it is expected that the OCR will not rise as high or as sharply as it has in past cycles.

For an assessment of how the increase in the OCR will affect you, or to discuss a plan to manage any future rises, contact us today.