4 Sep 2009

ASB predicts further cut in interest rate by Reserve Bank

7:13 am on 4 September 2009

Economists at ASB are betting the Reserve Bank will cut the Official Cash Rate from 2.5% to 2.25% next week.

While there are signs the recession is easing, economist Chris Tennant-Brown says manufacturers and exporters are still feeling the squeeze and the Reserve Bank needs to take action.

He says monetary conditions are too tight for business and the economy still faces quite a few challenges.

Also, the New Zealand dollar is contributing to tighter conditions and cutting the OCR is the only thing the Reserve Bank can do.

However, Mr Tennant-Brown acknowledges the market consensus is that the chance of an interest rate cut is only 1 in 10.

Since 24 July, 2008, the Reserve Bank has lowered the OCR from 8.25%. It was set at 2.5% on 30 April, 2009.