7 Dec 2009

No change expected in OCR

6:57 am on 7 December 2009

The Reserve Bank is reviewing the Official Cash Rate later this week: no change is expected in either the rate or the message.

The OCR has been at 2.5% since 30 April and economists do not expect any changes on Thursday.

Deutsche Bank chief economist Darren Gibbs says the focus will instead be on the messages that Governor Alan Bollard delivers.

He says Dr Bollard is likely to indicate the economy is improving, but only gradually and that there is still excess capacity and a weak labour market and a benign inflation outlook.

TD Securities senior strategist Annette Beacher also expects the bank to keep rates on hold.

But she says it should bring forward rate rise expectations from the second half of 2010 to the middle of next year.

Ms Beacher says she believes the Reserve Bank should start increasing rates by small increments in January.

She disagrees with the view that interest rates should remain on hold for the next nine months or so and then be ramped up because it will hurt households more rather than helping them.

The Reserve Bank will announce the OCR and issues its monetary policy statement at 9am on Thursday.