As expected, the Reserve Bank cut the official cash rate to a record low 1.75% yesterday, with expectations the country’s stubbornly low 0.4% inflation rate will rise to the midpoint of its 1%-3% target. The quarter point cut is not expected to be passed on in lower mortgage rates by banks, which are having to borrow money offshore at higher rates, partly because of the lack of deposits domestically. ASB chief economist Nick Tuffley noted there was no specific mention of Mr Trump’s victory by the Reserve Bank but it "referred to uncertainties about the global outlook". "Like many, the Reserve Bank will need time to actually see what happens and how that changes the New Zealand inflation outlook," Mr Tuffley said. On the question of the OCR being cut, but not passed on to mortgage borrowers, BNZ external relations consultant Mac Dalton said it was timely to remind borrowers that interest rates were not solely linked to the OCR.

Source: Otago Daily Times November 10, 2016 17:02 UTC