The Monetary Policy Committee noted there was a risk that the pain from higher interest rates would spread to the domestic economy “more strongly than expected.”
The market has been pricing in a cut in the OCR this year for some time, but yesterday's statement gives it reason to price in a more aggressive cut.
“The committee's message strengthens confidence that the bank will begin an easing cycle in November,” said Abhijit Surya, Australia and New Zealand economist at Capital Economics.
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“Some nuggets [the] “The policy announcement signals that the bank is one step closer to cutting interest rates,” he said.
Former central bank head of financial markets Michael Reddell told Newstalk ZB this morning that yesterday's statement was “a real shock”.
“This is a very different tone from the statement issued just six weeks ago, which raised the possibility of raising interest rates later this year and said the Fed would not even begin to cut rates until August next year,” Redel said.
“It's happening all over the place, but it's a change in the right direction.”
Westpac New Zealand general manager of product, sustainability and marketing Sarah Hearn said the rate changes would come as good news for customers looking to refinance their home loans in the near future.
“We are at a unique point in the cycle where some clients may be considering re-fixing at lower interest rates than the recent high rates,” Hahn said.
“We recognize that some customers are still refinancing their loans from historically low interest rates in recent years and may be concerned about rising costs.”
Westpac will also be making changes to a range of term deposits, including interest rate cuts of between five and 10 basis points on six-month and 18-month options.
Hahn said the bank continues to actively call mortgage customers who may be experiencing financial difficulties.
“Our data shows that most customers are coping well with the rising cost of living, but we encourage them to get in touch if they have concerns.”
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