RBNZ hopeful of cut in bank rates

The Reserve Bank of New Zealand said yesterday that it trusted that banks would, on this occasion, "pass on a lot" of the reduction in the cash rate pushed through by the RBNZ yesterday. The official cash rate in New Zealand is now 2.5 per cent, down from 3.0 per cent.

The RBNZ said it expected the cash rate to remain at this level or lower until toward the end of 2010.

A month ago the RBNZ took the trouble to caution the market on the then rising trend in fixed rate home loans, in part because the rising rates seemed incongruous given the increasingly weak outlook for the local and world economies.

The difficulty in New Zealand is that not many consumer loans are at variable rates. Many business rates are, though, and one of the few banks to announce a 50 basis point cut in indicator rates yesterday was Rabobank.