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Analysts at ANZ Bank New Zealand explained that the RBNZ has indicated it is willing to lower the OCR to boost the economy if required – But would it even work?  

Key Quotes:

“In our view, monetary policy is still working well – but it has changed. 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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