27 Jun 2016

Mixed views on OCR cut in August

2:10 pm on 27 June 2016

Prime Minister John Key does not expect the central bank to cut interest rates following the British vote to leave the European Union, but analysts are not so sure.

Reserve Bank

Photo: RNZ

The Brexit vote has shaken money markets, with the British pound plunging and sharemarkets falling sharply.

The uncertainty about the effect on the global economy has some investors and analysts picking the Brexit vote will force the hand of central banks.

But Mr Key does not think New Zealand's Reserve Bank is one of them, at least not in the short term.

"Primarily because what he's looking at is the strength of the New Zealand economy, and if you look at his last monetary policy statement he effectively had growth in New Zealand at a slightly stronger rate than the Treasury ... north of 3 percent."

But Mark Lister of Craigs Investment Partners disagrees, saying a cut on 11 August appears a done deal.

"People have already been speculating that we might see another OCR cut in August and that was looking like a bit of a 50/50 call.

"For me it's a much [clearer] call now, I think there's a very good chance they do cut the OCR."

In a statement, the Reserve Bank said it had been monitoring the financial markets, and while they had been volatile, they had also been orderly.

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