Reserve Bank holds on OCR, but remains poised to provide stimulus if required.
Yesterdays Reserve Bank policy announcement followed expected lines, retaining the official cash rate at 0.25%, while showing it is clearly ready to provide further support to the economy as required.
The previously announced Funding for Lending program, which allows the Reserve Bank to lend funds to retail banks at the prevailing OCR rate, should have some flow on effects to retail interest rates. Over the next 18 Months retail banks will have access to these loans, decreasing there cost of funds, this will likely only effect secured mortgage rates, spurring on an already strong property market. However, it is likely we see some form of LVR restrictions put in to effect over the next 6 months, which could slow the market.
Also of note RBNZ have lowered there unemployment forecasts to peak at 6.4% mid 2021, suggesting the economy is better than previously expected.
The recent announcement by Pfizer that its early data suggesting its vaccine is 90% effective against preventing Covid-19 will be a welcoming sign by many in travel, tourism and hospitality industries global. Auckland Airport (AIA.nz) and Air New Zealand (AIR.nz) both surged early this week on the back of this news. The New Zealand Governments deal with the pharmaceutical giant currently covers enough to vaccinate about 750,000 people. So while it is hope for a global recovery, it is important to stay cautious.
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