KEY POINTS:
Analysts react to the Reserve Bank's Monetary Policy Statement:
David Chaston, publisher of market analysis website interest.co.nz. says with no change in the official cash rate [OCR] since December last year, homeowners should fix their mortgages rather than put them on a floating rate.
Chaston says there may be some tightening in the economic environment but interest rates will stay at current levels.
"There's no prospect for a cut, there's no prospect for an increase, so a homeowner would look at the current environment logically and say 'what we've got now is what we're going into'."
Based on today's statement from the Reserve Bank, Chaston says homeowners would be sensible to fix their mortgages rather than put them on a floating rate.
"There is no need to look to signals from the Reserve Bank, because I don't think there are any, in this statement," he says.
"I think the signal that they will take, whether it's wise or not, is it's more of the same for the time being."
Chaston says that with less than 20 per cent of mortgages on a floating rate, the OCR announcements have little effect on mortgage rates.
ANZ National Bank chief economist Cameron Bagrie says there is a real chance that Alan Bollard will raise interest rates in January and the financial markets are pricing in a 40 per cent chance of a rate rise:
"Bollard has really stiffened the overall wording.
"He's a lot more concerned about medium-term inflation risk and the big culprit here is really the housing market. They're keeping a very close eye on the housing market indicators in the domestic economy.
"If these things don't roll he's going to be forced to hike rates in January."
Westpac economist Nick Tuffley says there won't be any rate cut until late 2007 at the earliest:
"The Reserve Bank has if anything upped its concerns about medium-term inflation pressures and is less confident about keeping rates on hold so the chances of a further rate hike have actually grown quite a bit with this statement.
"It's going to come down very much to whether the housing market looks like it's continuing to take off and there's also growing concern about the prospect of further fiscal stimulus [increased government spending] given how rosey the government accounts are.
"Any cuts are a long, long way off. We're talking about much later next year at the earliest."
