12 months at 4.35%
24 months at 4.29%
36 Months at 4.35%
60 Months at 5.25%
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First cash rate decision of 2016
The Reserve Bank of New Zealand has announced the Official Cash Rate has remained unchanged at 2.5% but indicated there may be future cuts later in the year.
Reserve Bank Governor Graeme Wheeler said in a statement:
Uncertainty about the strength of the global economy has increased due to weaker growth in the developing world and concerns about China and other emerging markets. Prices for a range of commodities, particularly oil, remain weak. Financial market volatility has increased, and global inflation remains low.
The domestic economy softened during the first half of 2015 driven by the lower terms of trade. However, growth is expected to increase in 2016 as a result of continued strong net immigration, tourism, a solid pipeline of construction activity, and the lift in business and consumer confidence.
In recent weeks there has been some easing in financial conditions, as the New Zealand dollar exchange rate and market interest rates have declined. A further depreciation in the exchange rate is appropriate given the ongoing weakness in export prices.
House price inflation in Auckland remains a financial stability risk. There are signs that the rate of increase may be moderating, but it is too early to tell. House price pressures have been building in some other regions.
There are many risks around the outlook. These relate to the prospects for global growth, particularly around China, global financial market conditions, dairy prices, net immigration, and pressures in the housing market.
Headline CPI inflation remains low, mainly due to falling fuel prices. However, annual core inflation, which excludes temporary price movements, is consistent with the target range at 1.6 percent. Inflation expectations remain stable.
Headline inflation is expected to increase over 2016, but take longer to reach the target range than previously expected. Monetary policy will continue to be accommodative. Some further policy easing may be required over the coming year to ensure that future average inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data.
Housing Market Sentiment cools
Auckland’s housing measures continue to show their impact, with price expectations continuing to cool, ASB’s quarterly survey of housing market sentiment reveals.
The RBNZ’s new housing measures aimed at regulating Auckland investor activity have taken some of the heat out of the market, reflected in the latest survey results.
A net 44% of survey respondents now expect house prices will increase over the next 12 months, down from the net 52% who expected price gains last quarter, and well down from the record high of 69% in the three months to July.
The fall in net house price expectations is most pronounced in Auckland, where net price gain expectations fell to 30% from 50% last quarter.
ASB chief economist Nick Tuffley says that the decline in net price expectations in the rest of the country was a little more surprising.
“Recent trends have indicated that the Reserve Bank’s new lending measures have bought an accelerated house price growth outside of Auckland, something we had expected to see,” Tuffley says.
“Yet this survey doesn’t show any strengthening of price expectations beyond Auckland.”
The survey also asked its respondents whether it was a good or bad time to buy a house and found that sentiment, although still low, has improved slightly.
A net 5% of respondents said now is a bad time to buy a house. Auckland (at 22%) and Canterbury (4%) continue to be the two most pessimistic regions.
“Sentiment has become a little less pessimistic in the latest survey,” Tuffley says.
“This quarter, a net 22% of Auckland respondents regard now as a bad time to buy a house, down slightly from 25% last quarter. High house prices and the tight housing market will continue to weigh on sentiment, as may the additional tax and lending rules.”