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Analysts at ANZ note that the RBNZ has indicated it is willing to lower the OCR to boost the economy if required and in ANZ’s view, monetary policy is still working well – but it has changed.

Key Quotes

“The neutral OCR is now considerably lower, meaning that although the OCR is at a record low, the current degree of monetary stimulus is by no means unprecedented.”

“The availability of credit appears to be a headwind for the economy at present. But a lower OCR would nonetheless be effective at boosting demand. It would improve household and firm financial positions, stimulate net exports via a lower NZD, and encourage spending and investment.”

“We would also note that while financial stability risks are important, they shouldn’t be a barrier to loosening monetary policy; they can be mitigated.”

“This week brings the GDP and Balance of Payments releases for Q2. We are expecting 0.7% q/q for GDP, boosted by temporary factors.”

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