Westpac sees OCR bottoming at 2.5pc

[essence]

Wednesday, 14 January 2009

Grim economic conditions will justify the Reserve Bank cutting the Official Cash Rate (OCR) as low as 2.5 percent by the middle of this year, Westpac economists say.

"With fuel prices falling, and more spare capacity opening up in the domestic economy, inflation is completely off the radar for the near term," Westpac chief economist Brendan O'Donovan said.

"We now expect the OCR to be cut to 2.50 percent by the middle of this year, down from our previous forecast of 4.00pc," he added.

WOW! Pretty scary stuff when Bank's are suggesting this.

http://www.stuff.co.nz/4818590a13.html

[Stevegoodey]

Could mean we could be fixing our mortgages for 5 years at 3.99% by the middle of the year.

Then it will be time to go shopping.

[ActionMan]

http://www.rbnz.govt.nz/keygraphs/Fig7.html

This graph may have been posted before but the picture really shows the unprecedented sharp fall in the OCR since July 2008.

Does time go fast - that's 6 months ago! I can't believe that we were sitting at OCR of 8.25 for 12 months from June 2007 to July 2008.

It's a 'falling dagger' as they say.

[muppet]

"With fuel prices falling,

Hahahahahaha, they went back up again today.
Something to do with the falling NZ dollar.

[Badger]

Fuel prices will be heading up regardless of any OCR or GDP spin. Both these terms when examined in daylight are nonsense...

The lower the OCR goes the more worthless the currency. This leads to other more serious problems further down the road...

...and the band played on...

[Tucker]

Yes will be great to fix some rates at 4%

[nzfrazer]

Do any of you long term investors remember being able to fix 5yrs at 4% before?

My Kiwibank floating today down to 6.99%, drop baby drop! ;-)

[Bluekiwi]

Are 2 and 5 year rates usually about 1.5% above OCR ?

Is 10 year fixing an option, and what premium would that be ?

[Paul34]

The fixed rates vary relative to how the banks predict the future.

What the 5 year fixed rate is going to be at its lowest is the question on everyone's lips!

[JohnL]

I look at the bank rates since 1992 (downloaded from the Reserve Bank site). The 5 year rate only dropped below 7% for a three month period once.

It does look as it might drop lower this time but we will only know by how much in hindsight!!!!

John

[Bluekiwi]

What the 5 year fixed rate is going to be at its lowest is the question on everyone's lips!

Yeeesss (said licking lips)

Although 7 is a can do, but not 10 ?

[Playachicken]

Hmmmmmm, one has to think all the bank economists must have sat around a table drinking coffee dreaming up thier latest weekly newsletter - they're all singing the same tune for once!!

[Badger]

You mean tea so they could read the leaves?

[muppet]

Badger, you are as negative as all the newspaper reports.

Do you have any thing positive to say?

[Badger]

Badger, you are as negative as all the newspaper reports.

Do you have any thing positive to say?

Tea leaf economics is that negative? Thats what you're believing in!

Muppet we shall all be finding out what worthless currency is all about in time...

Contrary to the current yeee haa banner waving, this is not a good sign.

Theres a big disconnect here with what low interest rates really mean, but you'll have to go figure that out for yourselves...

Got Gold?