Reserve Bank cut may not be the last this year

Reserve Bank cut may not be the last this year

The Reserve Bank is expected to cut interest rates tomorrow in a bid to stimulate the weakening economy. Economists say it may not be the last cut this year.

So what does it mean for our mortgages and savings?

Economists 3 News spoke with are all tipping a rate cut tomorrow, down a modest quarter of a percent to 3 percent. That's because of low inflation and weakening demand.

The Reserve Bank has an inflation target of between 1 percent and 3 percent, but it's currently well below that, down at less than 0.5 percent.

We've seen some weaker economic indicators since the rate cut last month. There have also been slumping dairy prices, a drop in consumer and business confidence and slowing demand from China.

Cutting interest rates means it's cheaper to borrow money, and that could potentially fuel the Auckland housing market, but the housing market is not the centrepiece of the Reserve Bank's responsibility and it needs to move on interest rates to boost other parts of the economy.

The BNZ says an OCR cut of 0.5 percent tomorrow would be seen as a panic move, but we could see one or even two more rate cuts before the end of the year, which is good news for mortgage holders.

3 News