8 Jan 2016

Economist tips OCR to stay at 2.5%

12:42 pm on 8 January 2016

BNZ Bank's chief economist Tony Alexander expects the Official Cash Rate to stay the same for at least two years, he says.

In his latest market report, Mr Alexander said he expected the Reserve Bank to keep the rate at 2.5 percent until 2018.

But the bank would be cautious because of excess production worldwide, especially in China, Mr Alexander said.

"A few too many factories, one could say, over there, and there also appears to be a wee bit too much oil sloshing around the world, excess production of coal, iron ore etc, so global inflation is also being kept low because of that."

Online shopping was also helping keep inflation down, he said.

"The cost of searching an alternative price for a thing has radically reduced as a result of smartphone technology and so businesses are finding it very difficult to raise prices."

However, it would open the door to another rate cut if the Chinese market were to deteriorate further, Mr Alexander said.

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