The Reserve Bank Governor, Dr Alan Bollard has just announced that the Official Cash Rate (“OCR”) is to remain unchanged at 2.50%.  This move was widely expected by economists.  On discussions with my business banking contacts they say that they have already factored in a 0.5% increase into fixed rates by 30 June of this year.

Dr Bollard’s press statement interestingly said that:

the New Zealand economy continues to recover…

The economy is being assisted by both monetary and fiscal policy support…

If the economy continues to recover in line with our December projections, we would expect to begin removing policy stimulus around the middle of 2010.”

As a result I predict that the major banks will not change their floating rates, but perhaps edge up their 1 – 3 year rates a little bit further.  The floating rates will rise when the OCR rises.  I predict that the OCR will stay unchanged on March 11, April 29, but then rise by 0.25% on 10 June 2010.

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