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Economists lean towards OCR hike next month

Kiwibank economists have joined their peers in calling for an official cash rate increase next month as the economy displays signs of overheating. 

Monday, July 19th 2021, 4:50PM

Data released last week revealed that inflation has soared to a ten-year annual high of 3.3%, with cost increases across housing, transport, food and construction.

With unemployment low and the economy running hot, economists at Kiwibank believe the Reserve Bank's Monetary Policy Committee and governor Adrian Orr (pictured) should take action. 

"The next move is almost certainly a rate hike," the team said. "The 'least regrets' stance is firmly favoured. We now expect the RBNZ to lift the cash rate in August (a little over four weeks from now), in what will be the first of at least three hikes from here.

"We’re likely to see two hikes by year end, and a push to 1% by February."

While the analysts believe the RBNZ will raise the OCR by 75 basis points by February, further hikes will depend on the "sensitivity of the economy coming off record low rates", the team said.

"We have pencilled in another lift in the cash rate to 1.5%, but that’s likely to be all we see in the near-to-medium term. An earlier lift off from the RBNZ will (hopefully) mean less work will need to be done to restrain the economy in the future."

ASB's team has also pencilled in successive rate hikes in August and November, but says the central bank will stick to a "gradual pace", given the "lingering uncertainty" of Covid.

Like Kiwibank, ASB analysts predict a "relatively low" OCR endpoint of 1.5% in the coming cycle.

BNZ's team have also weighed in on the pace of rate increases to be expected over the next year. 

The bank's team, including head of research Stephen Toplis, say there is "an increasingly viable" argument for a 1% OCR by November, with hikes in August, October and November.

The team suggested that the central bank could spring a surprise with a 50 basis point increase in the coming months.

Tags: economy inflation OCR OCR forecasts

« Small investors pull backClient concern over rate rises »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.44 - - -
AIA - Go Home Loans 7.99 5.99 5.69 5.69
ANZ 7.89 6.59 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.99 5.69 5.69
ASB Bank 7.89 5.99 5.69 5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.40 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.94 - - -
BNZ - Rapid Repay 7.94 - - -
BNZ - Std 7.94 5.99 5.69 5.69
BNZ - TotalMoney 7.94 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.79 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 7.65 5.99 5.75 5.69
Co-operative Bank - Standard 7.65 6.49 6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.40 6.10 -
First Credit Union Standard 8.50 7.00 6.70 -
Heartland Bank - Online 7.49 ▼5.65 ▼5.55 ▼5.55
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC 7.49 5.99 5.65 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.75 6.89 6.59 6.49
Kiwibank - Offset 8.25 - - -
Kiwibank Special 7.75 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.44 ▼6.39 ▼6.09 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.99 6.95 6.29 6.29
SBS Bank Special - ▼6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.44 ▼5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.69 6.79 6.49 6.49
TSB Special 7.89 5.99 5.69 5.69
Unity ▼7.64 5.99 5.69 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society 8.50 ▼6.19 ▼5.79 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 7.99 6.17 5.79 5.69

Last updated: 30 October 2024 9:36am

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