Wheeler catches everybody by surprise

Wheeler catches everybody by surprise

Graeme Wheeler caught us all by surprise with the latest cut in the OCR. Yes, we all knew inflation was very low and that dairy is not in a good state right now – but nobody anticipated an early cut in the OCR. So what does that mean for us?

Lower rates?

With rates already being at record lows, we have not seen much movement yet in fixed rates. Across the banks, we have at this point seen 0.1% movement on average, with banks maintaining that the cost of funds has not come down at the same level as the OCR cut of 0.25%. We’ll have to see where that leads.

Property slump?

In my opinion, not yet. With lower rates and availability of credit accompanied by a low unemployment rate, growth in the overall economy, positive migration flow, and lack of housing I expect the property market to remain active with big gains to be expected in Hamilton and Tauranga.

Interest rate forecast?

I quote from Tony Alexander, chief economist of BNZ:

“You are foolish to make your interest rate risk management decisions highly dependent upon a particular set of interest rate forecasts proving accurate… our ability to forecast interest rates has gone out the window post-GFC because apart from correctly picking the 1% rise in the cash rate over 2014, we and everyone else have gotten essentially nothing right – since late-2007 in fact.”

I was reminded of that on the 12th of March when nobody got that prediction right. Therefore it is prudent to put a strategy in place that protects you against volatility and takes your personal circumstances into account. We can help with that.