We expected that most of the OCR cuts would be relatively short-lived, while the economy regained its footing. Financial market prices suggest that the private sector typically shared that sort of view. Two years ago, for example, we thought the OCR would be around 5.75 per cent by now (Figure 12).
It is still 2.5 per cent, and financial markets have recently been toying with the idea that the OCR might yet need to go lower (albeit mainly because of global risks). Even our counterparts across the Tasman, dealing with Australia’s record terms of trade, have been cutting their policy rate back towards 2009 lows.