Official Cash Rate now at 4.25%
At its final sitting for the year, the Monetary Policy Committee today agreed to reduce the Official Cash Rate by 50 basis points to 4.25 percent as expected.
This is great news with most banks having already reacted by dropping floating rates by 0.5% and we’re expecting to see a flurry of fixed rate reductions announced over the coming days.
With inflation near the target midpoint of 2% and the economy continuing to evolve as projected, the committee expects to be able to lower the OCR further at its next sitting on 19th Feb next year continuing on its downward trajectory.
Another great by product is the subsequent reduction in ‘test rates’ the rates banks use to assess affordability with a buffer between actual and potentially increased rates meaning at assessment time, your income goes further allowing more lending to be placed against it, ASB for example have reduced theirs from 8.1% to 7.6% being a whole half percent, this is the first reduction in test rates since before rates started climbing in 2021.
It couldn’t be better for the stage we’re at with economic activity remaining subdued and expected to recover during 2025 with lower interest rates encouraging investment and other spending with the financial stress we’ve all been feeling set to ease in time.
We’re not there yet but getting there with employment growth expected to remain weak until mind 2025 and global economic growth expected to remain subdued in the near term coupled with geopolitical conditions and policy uncertainly contributing to increased economic and inflation volatility over the medium term.
So happy days, we’re continuing to head in the right direction and easing the restrictive practises the Reserve Bank has had to put in place to fix this … and it’s working.
Click on the following link to see the full statement.
We’ll be back with more on the results of this announcement in due course.
