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Economists react to rate hold decision

Economists believe the Reserve Bank will raise the official cash rate in October, despite keeping it on hold today. 

Thursday, August 19th 2021, 6:37AM

by Daniel Dunkley

Adrian Orr, RBNZ

ASB's Nick Tuffley believes rates will begin to rise the next time the central bank makes an interest rate decision. He expects increases in October, November and February, each of 25 basis points.

However, he said the call was dependent on the severity of the delta outbreak.

"Assuming the outbreak is stamped out relatively soon, we expect the RBNZ to start lifting the OCR from October. However, this view is highly conditional on a short-lived lockdown. Markets will be very sensitive to the run of Covid headlines, so brace for volatility for a period."

Tuffley doesn't believe a short lockdown will have more than a "very modest lasting economic impact".

"But Australia’s situation is a warning that events can quickly spiral out of control. The evolution of this outbreak will be a very important influence on the RBNZ’s actions over the rest of this year."

Westpac's Michael Gordon was also confident the RBNZ would pursue the rate hike track.

"The RBNZ’s statement was much in line with what we expected: it intends to lift interest rates over the coming years, but held fire this time given the level of uncertainty about this new outbreak. Indeed, while the projected OCR track – which was likely adjusted to reflect today’s decision – still implied at least one rate hike by the end of this year, it’s too early to take any meaningful guidance from this as to the timing of the first move.

"Experience shows that economic activity tends to bounce back readily when Covid restrictions are lifted. Once that happens, the RBNZ will be faced with much the same issues as before in terms of capacity constraints. The issue is the extent to which the lockdown acts as a handbrake on demand, which had otherwise been rapidly building momentum this year."

Meanwhile, Jarrod Kerr of Kiwibank noted the RBNZ's "aggressive" OCR track projection.

"The RBNZ is signalling at least one rate rise by year end, all going well with the current Covid community outbreak. And the OCR is forecast to hit 2% by the end of 2023. That’s an aggressive track compared to market pricing, and our own forecast track which struggles to rise above 1.5%.

"There was no doubt the RBNZ would have delivered a 25bp rate hike today, had the country not gone into a swift lockdown," Kerr's team added.

Tags: Covid-19 OCR OCR forecasts

« OCR decision revealedReserve Bank predicts fall in house prices »

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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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