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How are markets affected by RBNZ meetings and the Official Cash Rate?

How are markets affected by RBNZ meetings and the Official Cash Rate?

Cutting rates

The objective of any rate cut is to stimulate the economy by encouraging companies and businesses to borrow to invest in their growth. Growth in private investment would in-turn see demand for labour increase and boost employment and wages.  It would be a positive move for mortgage holders as it reduces interest repayment costs. However, on the flip side it also reduces income for savers that rely on investments such as term deposits.

Effect on property markets?

The initial effect of a rate reduction would be to boost mortgage affordability and in-turn lift demand for all property types. This move would have a positive effect on major property markets around the country. Another positive side effect of a rate cut would be the growth in the construction of new residential projects as investors and buyer demand rises for off the plan properties.

Keeping rates firm

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