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16 Nov 2015
NZD: Cooling housing market reignites OCR reduction bets by RBNZ – Westpac
FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, notes that the Auckland housing market is now suffering a hangover from its recent excesses, food price inflation has proven very low, and world dairy prices are dropping again.
Key Quotes
“This reinforces our view that the Reserve Bank will need to reduce the OCR further than the market is currently expecting. The message from the REINZ’s October housing report was decisive. Nationwide house sales fell by 7%, the time taken to sell a house lengthened, and the house price index fell 4% – the biggest single-month decline on record going back to 1992.”
“The weakness was especially concentrated in Auckland, with sales down 15% and prices down almost 5% in just one month. A slowing in the housing market is crucial to the interest rate outlook. The rampant Auckland housing market has been seen by the RBNZ as an impediment to cutting the OCR too far or too fast. If the housing market remains off the boil in coming months, it would give the RBNZ more leeway to cut the OCR further in order to bring inflation back towards its target.”
Key Quotes
“This reinforces our view that the Reserve Bank will need to reduce the OCR further than the market is currently expecting. The message from the REINZ’s October housing report was decisive. Nationwide house sales fell by 7%, the time taken to sell a house lengthened, and the house price index fell 4% – the biggest single-month decline on record going back to 1992.”
“The weakness was especially concentrated in Auckland, with sales down 15% and prices down almost 5% in just one month. A slowing in the housing market is crucial to the interest rate outlook. The rampant Auckland housing market has been seen by the RBNZ as an impediment to cutting the OCR too far or too fast. If the housing market remains off the boil in coming months, it would give the RBNZ more leeway to cut the OCR further in order to bring inflation back towards its target.”