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Reserve Bank: OCR cut a surprise in timing, not magnitude

Newstalk ZB,
Publish Date
Thursday, 8 August 2019, 7:01PM
The Official Cash Rate was cut yesterday. (Photo / Getty)

The Reserve Bank's chief economist thinks that some commentators are being naive in their criticism of the decision.  

Yesterday, the Reserve Bank surprised economists and the markets by slashing the Official Cash Rate by 50 points to one percent.

It declined by 0.25 in May - but before that it had been unchanged for two and a half years.

Chief economist Yuong Ha told Heather du Plessis-Allan that the US and China trade war was not a factor in their decision. 

He says that when the staff sat down to produce the forecast, they all debated the merits of the cut. 

"We all agreed that significant monetary policy was needed, and you see that in the monetary policy statement in the order of an additional 60 basis points, and so we thought if we're confident in that view, let's just get on with it." 

Ha disagrees that it is too much too soon, as some economists have suggested. 

Ha says that they had expected them to make the 50 point cut by the end of the year, but that it would be split in two halves.

"The fact that we delivered 50 points up front is more a surprise in timing, not magnitude." 

Ha says that they did not think it would surprise people, and that 50 points is an unambiguous cut in interest rates. 

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