KEY POINTS:
Reserve Bank governor Alan Bollard could be cutting official interest rates by September, says an ASB Bank economist.
In a report published this afternoon, bank chief economist Nick Tuffley said the Reserve Bank had "already shifted its risk bias in a 6-week space that has shown a few warnings about the health of the economy."
This was a signal that the Reserve Bank had already "started the gradual shift towards eventually expressing a clear easing bias."
"We see the RBNZ waiting to ascertain that the current wave of doom and gloom" is more than just a patch the economy is going through. The RBNZ would want to avoid reacting to something that turned out to be temporary. We now expect the RBNZ will begin cutting the OCR at the September 11 meeting, delivering a 50 basis point cut," said Tuffley.
The OCR currently sits at 8.25 per cent, unchanged when the Reserve Bank last looked at it on April 24.
"The housing market is now showing clear signs of responding to last year's OCR increases, and more tightening is effectively in the pipeline as existing mortgages refix at higher rates. There is some risk that retail spending and the housing market soften by more than the RBNZ has been expecting." said Tuffley.
Externally, the weak US housing market was a "looming risk to NZ export growth." The full extent of the impact on the US economy would be uncertain for "a considerable time."
- NZ HERALD STAFF
