Further rate cut predicted after Easter

By Phil Boeyen, ShareChat Business News Editor

Thursday 12th April 2001

The recent fall in business confidence may add extra impetus to a Reserve Bank interest cut next week.

The bank is due to announce any revision to the Official Cash Rate on Thursday, with commentators suggesting a further cut of 25 points, the same as last month's decision.

Although at that time Reserve Bank governor Don Brash said further reductions were not inevitable, Deutsche Bank says a further 25 point cut will "help to forestall an extension of the apparent moderation in business and consumer confidence in recent weeks".

"Negative economic data since the March edition was compiled suggests that a further downward revision can be expected when the April edition is released.

"As far as the domestic economy is concerned, data has tended to verify the Bank's view of economic activity in recent months."

Deutsche Bank says the market is already pricing a full 25 point cut on Thursday, with a similar cut in May.

"If the RBNZ cuts rates by 25bps and issues a fairly cautious statement as expected, we would expect little reaction from the interest rate market."

HSBC says it too is expecting a further cut.

It says although the growth outlook looks positive, consumer spending has been sluggish, and the construction sector has slumped.

"While growth should hold up reasonably well in the first half of this year, the economy will weaken markedly in the second half as export gains fade," HSBC says.

"We expect more official rate cuts from the RBNZ, but too little and too late to prevent a slowdown in growth in 2H 2001."

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