No surprises: Reserve Bank leaves OCR unchanged

The Reserve Bank appears unlikely to be changing the official cash rate from 1.75% until late...
The Reserve Bank appears unlikely to be changing the official cash rate from 1.75% until late 2019, economists are picking. Photo: Getty Images
The interest-driving official cash rate was left unchanged by the Reserve Bank at 1.75% yesterday, with the central banks maintaining a neutral stance and analysts still not expecting a change until late 2019.

The first statement by Reserve Bank acting governor Grant Spencer said house price inflation — a key concern  during the past 18 months —  continued to moderate, due to loan-to-value ratio restrictions, affordability constraints and a tightening in credit conditions.

"This moderation is expected to continue, although there remains a risk of resurgence in prices given population growth and resource constraints in the construction sector," Mr Spencer said.

ASB chief economist Nick Tuffley said the  result  was "universally expected" and the "key message" was the Reserve Bank "maintaining a neutral stance".

"There is a hint the growth outlook may have been tweaked down very slightly," Mr Tuffley said.

Mr Spencer said GDP in the quarter to June grew in line with expectations, after relative weakness in the prior two quarters.

"While exports recovered, construction was weaker than expected.

"Growth is projected to maintain its current pace ...  supported by accommodative monetary policy, population growth, elevated terms of trade, and fiscal stimulus," he said.

Annual consumer price index inflation eased in the June quarter, but remained within the Reserve Bank’s 1%-3% target range.

Mr Spencer said  headline inflation was likely to decline in coming quarters, while longer-term inflation expectations remained  anchored  around 2%.

simon.hartley@odt.co.nz

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