The Federal Reserve decided this Wednesday to hold interest rates steady at 2.25% – 2.5% and indicated that no more rate hikes will be coming this year.
This is likely to provide stability to market interest rates for the rest of the year. We can expect interest rates in NZ and Australia to follow US and to stay at their current levels assuming bank funding costs don’t continue to rise. Regardless of the OCR, we are unlikely to see mortgage interest rates to fall further given that NZ banks are now being required to increase their capital which will increase their funding costs.
The relatively good news for borrowers is that it provides some certainty that interest rates will remain similar to the current rates in 2019. The bad news is that banks are already tightening their credit policies given the worsening economic outlook.