The Monetary Policy Committee noted risks that interest rate pain may be feeding through to the domestic economy “more strongly than expected”.
While markets have for some time been pricing in OCR cuts for this year, yesterday’s statement gave them reason to price in even more aggressive reductions.
“The committee’s messaging gives us greater confidence that the bank will commence its easing cycle in November,” said Abhijit Surya, Australia and New Zealand economist at Capital Economics.
“There were a few nuggets in [the] policy announcement that show that the bank is now one step closer to cutting rates,” he said.
Former Reserve Bank head of financial markets Michael Reddell told Newstalk ZB this morning that yesterday’s statement “was a real lurch”.
“It was very different in tone from the statement they brought out only six weeks ago, which was talking up possible rate hikes later this year and not even beginning to cut until August next year,” Reddell said.
“It’s all over the place, but a shift in the right direction.”
Sarah Hearn, Westpac New Zealand general manager of product, sustainability and marketing said the rate changes would be welcome news for customers looking to refix their mortgage soon.
“We’re at a unique stage of the cycle where some customers may be looking to refix at lower rates from recent highs,” Hearn said.
“We do also acknowledge that some customers may be still refixing their loans from the historically low rates we have seen over recent years and may still be concerned about their increasing costs.”
Westpac will also make changes to a range of its term deposits, with rates dropping by between 5 and 10 basis points across its six- to 18-month options.
Hearn said the bank was continuing to proactively call home loan customers who may be facing financial difficulty.
“Our data shows most of our customers are coping well with higher living costs, but we encourage them to get in touch if they have any concerns.”
