RBNZ Says 'Large Part' of Rate Cuts Have Been Passed On

A “large part” of the Reserve Bank of New Zealand’s aggressive rate cutting campaign has been passed on to both consumers and business borrowers. In its “New Zealand bank funding costs and margins” report, published on the bank’s website, the statement said that “a large part of the OCR cuts have been passed on to household and business borrowing rates.” Since July of 2008, the bank has slashed its overnight cash rate by 600 basis points to 2.50%. Despite this effort, and the its visible results, the mortgage market might not exactly benefit as much as the RBNZ would have appreciated. The statement added that “the spreads between marginal funding costs and floating mortgage rates have widened in recent months to historically high levels.” This noted reflection of risk-aversion might “hinder the efforts of monetary policy to stimulate economic activity.” It is yet unclear whether such a statement will prelude another rate move down. But for now, one might choose to think that if 600 basis points worth of cuts have failed to ease the pressure on mortgage rates, that yet another move down might not be so effective in easing such a variable.