NZIER’s Shadow Board continues to recommend no change in the OCR

25 September 2018

NZIER’s Monetary Policy Shadow Board’s view remains firmly centred on no change to the Official Cash Rate (OCR) ahead of the Reserve Bank’s OCR Review on Thursday.

“The New Zealand economy is being buffeted by opposing forces. The global economy is improving, and interest rates are lifting in the major economies, led by the US. However, businesses have become more cautious about investing in new plant and machinery and buildings here in New Zealand. This supports the case for the OCR to remain on hold, with one Shadow Board member likening it to Groundhog Day.” said Christina Leung, Principal Economist at NZIER.

“The Reserve Bank presented in its August Monetary Policy Statement (MPS) a scenario which would warrant an OCR cut. However, with interest rates lifting globally and the economic outlook remaining reasonably robust there is general agreement amongst the Shadow Board that a tightening bias remains appropriate. This tightening bias amongst the Shadow Board has softened slightly ahead of this OCR decision.”

Figure 1 View firmly centred on unchanged OCR

* distribution may not add up to 100% due to rounding

Source: NZIER Monetary Policy Shadow Board

Figure 2 Individual participants’ recommended rate settings – 19 September 2018

Source: NZIER Monetary Policy Shadow Board

Table 1 Participant comments 

Carolyn Luey While the local economy seems to be ticking along (seemingly oblivious to reported low levels of confidence), macro uncertainties should see the Reserve Bank leave the OCR alone.
Arthur Grimes Interest rates are rising overseas (e.g. in the US), growth is weakening slightly in NZ, while inflation is well under control. Overall, this suggests there is no need to alter rates at this juncture.
Dominick Stephens No comment.
Kirk Hope

No comment.

Viv Hall No comment.
Stephen Toplis We have to acknowledge the downside risk presented by weakening business confidence but this is not sufficient to deter us from our core view that rising inflationary pressures call for a tightening bias.
Prasanna Gai No comment.
Kerry Gupwell No change to the rate yet. In considering this update it feels like Groundhog Day.  
Jarrod Kerr It’s an OCR, not an MPS, so there’s limited chance of a move outside a disaster.  I think the better question is where we see it in a year.

About the NZIER Monetary Policy Shadow Board

NZIER’s Monetary Policy Shadow Board is independent of the Reserve Bank of New Zealand. Individuals’ views are their own, not those of their respective organisations. The next Shadow Board release will be Tuesday 6 November 2018, ahead of the RBNZ’s MPS. Past releases are available from the NZIER website:

Shadow Board participants share out 100 points across possible interest rates to indicate what they believe is the most appropriate Official Cash Rate setting for the economy. Combined, these scores form a Shadow Board view ahead of each monetary policy decision.

Participants show where they think interest rates should be, not what they believe will happen.

The NZIER Monetary Policy Shadow Board aims to:

  • encourage informed debate on each interest rate decision
  • help inform how a Board structure might operate
  • explore how Board members could use probabilities to express uncertainty.

For further information, please contact:
Christina Leung, Principal Economist & Head of Membership Services, 021 992 985