Reserve Bank expected to keep OCR at 1.75 percent

Author
Michael Sergel,
Section
Business,
Publish Date
Thursday, 9 February 2017, 7:08AM
Reserve Bank Governor Graeme Wheeler (Photo / Mark Mitchell)

A change of Governor and a potential change of Government could keep interest rates low this year.

Reserve Bank governor Graeme Wheeler is expected to keep the Official Cash Rate at 1.75 percent this morning.

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He is leaving the role in September, just three days after this year's general election. Deputy Governor Grant Spencer will fill in until the next Governor is appointed.

Westpac economist Satish Ranchhod said the OCR may not be changed until the new Governor starts in March next year.

"It will be pretty unusual for the Governor to set monetary policy on a new path on his way out the door," he said.

Ranchhod said inflation is back over one-percent, but the central bank wants it to be higher.

"That means they'll need to keep the domestic economy growing at a solid pace for some time, and that requires continued low rates."

The NZIER Shadow Board believes the OCR could remain on hold until the middle of next year.

Finance Minister Steven Joyce has issued a warning to mortgage holders, that low interest rates won't last.

Personal finance expert Hannah McQueen told Mike Hosking while the Official Cash Rate isn't expected to increase today, banks' funds are lowering, and the purse strings are tightening.

"If prices were to rise by .5, to some people that might be an increase of $50 a week in outgoings, which if you can't afford that if you're in the lowest interest rate environment, well that's the problem."

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