No change to OCR forecast, temporarily

The Reserve Bank is forecast to leave the interest-driving official cash rate (OCR) unchanged tomorrow, on the record low 1.5%, but with a bias towards lowering it further later in the year.

The Reserve Bank is scheduled to release its OCR statement tomorrow.

All 20 economists surveyed by Bloomberg expected the OCR to stay at 1.5%, but 11 expected a 25 basis point rate cut at the August 7 monetary policy review, BusinessDesk reported.

Westpac chief economist Dominick Stephens expected the central bank to leave the OCR on hold, reiterating a bias towards easing.

"We are now forecasting an August OCR cut," he said.

Mr Stephens expected the Reserve Bank would express concern about deepening risks to the global economy, and also increasing likelihood other central banks would reduce interest rates.

"The domestic outlook has not changed much, but these global risks increase the likelihood that the Reserve Bank will cut again," he said.

A drop in mortgage rates was even more reason to expect an upturn in both New Zealand's housing market and economy during the year ahead, he said.

The Reserve Bank of Australia board members agreed further reductions to the cash rate were "more likely than not" when they cut it to a record low 1.25%, earlier this month, AAP reported.

ASB senior economist Mark Smith similarly believed the OCR would remain on hold, also only temporarily.

"This is only expected to be a temporary respite, with the OCR set to hit another record low of 1.25% in August," he said.

He said talk of the OCR falling towards, and even below 0%, and unconventional policy support being necessary "looks a little premature at present", but that the Reserve Bank should be prepared to act if needed.

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