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21/3/2018 — General
Governor changeover won’t impact OCR
By Dene Mackenzie

The Reserve Bank is expected to keep its official cash rate unchanged at 1.75% tomorrow, as the announcement becomes overshadowed by market perceptions of new Governor Adrian Orr.

The announcement will be a brief one-page statement, unlikely to be changed from February.

It will be the last announcement by Acting Governor Grant Spencer before he retires and makes way for Orr.

ASB chief economist Nick Tuffley said Orr's arrival, and details of the new Policy Targets Agreement with the Government, would overshadow the announcement.

The new agreement with Finance Minister Grant Robertson could come as early as next week.

“The new PTA is yet to be announced though it's widely expected maximising employment will be added as a second target alongside price stability.

“The decision-making process will move to formalise a committee versus single decision-maker - though this may not take effect until the Reserve Bank Act itself is changed, possibly later this year.”

How Adrian Orr's leadership would affect monetary policy decision-making was unknown at this point but it was not likely to have a material impact, Tuffley said.

It was anticipated Mr Orr's initial focus at the Reserve Bank would be on managing the Government's changes to the Reserve Bank Act, not necessarily delving into the “deep minutiae” of the central bank's economic forecasts.

OCR hikes were not seriously on the table until 2019. Between now and then unexpected economic developments were likely to have a greater effect on the OCR outlook than any differences in interpretation the new governor and a voting committee might have from the outgoing governors of the past five and a-half years, he said.

BNZ senior economist Craig Ebert said the RBNZ would probably not be keen to follow the global tendency towards less monetary stimulus, at least not soon.

“If there is a risk around Thursday's OCR review, it is that the bank comes across a touch dovish, perhaps with reference to the near-term CPI (inflation). However, all up, we believe the bank will affirm a steady-as-she-goes message.”

If there were any emerging issues to budge the bank from its firmly on-hold mindset, they could well be left to the next Monetary Policy Statement in early May.

*Dene Mackenzie is business editor of the Otago Daily Times.

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