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Experts united over interest rate gloom

Economists are singing in unison about Wednesday's interest rate announcement by the Reserve Bank.

Sunday, October 2nd 2022, 7:22AM 1 Comment

by Eric Frykberg

They are performing the 50-point chorus like a well-drilled choir, and it will be the fifth consecutive time this song will have been heard.

Ordinary borrowers, meanwhile, will be getting the blues, as the official cash rate (OCR) goes up from 3.00% to 3.50%, and home mortgages follow with a refrain.

There are all the usual reasons for this choice of music.

“Sticky” inflation gets a lot of the blame, according to ANZ economists.

They think the CPI might have peaked at 7.3% for the June quarter, but getting it back down again will be very hard work.

“Back in the August Monetary Policy Statement, the RBNZ made it clear that it intended to raise the OCR by 50 basis points at the October and November meetings,” the ANZ team wrote.

“There have been no significant data surprises that would provide a compelling reason for the RBNZ to diverge from that path.”

Westpac senior economist Satish Ranchhod also forecasts a 50-point rise on Wednesday, and two more to follow.

That will take the OCR to a peak of 4.50%, up from his earlier forecast of 4.00%.

As with his ANZ brethren, Ranchhod blamed more persistent inflation pressures than he had anticipated.

“In particular, we now expect the New Zealand dollar to be lower for longer, adding to the pace of inflation in the year ahead.

“In an already overheated economy....the risks of second–round inflation pressures are greater. We expect the RBNZ to repeat that the OCR will continue to rise 'at pace',” Ranchhod wrote.

Kiwibank's chief economist Jarrod Kerr is also expecting a 50 point rise, followed by another in November.

“Aggregate demand remains too high relative to the Kiwi economy’s ability to meet it,” he said.

“Supply-side factors such as chronic staff shortages, and delays in deliveries of materials are keeping productive capacity constrained, and a continued tightening of monetary conditions remains justified, for now.”

So the economists are all singing the same song, and parts of it are a gloomy dirge.
According to Kerr, the Reserve Bank needs to see “pain in households before they are confident they’ll beat inflation back down to 2%.”

Ranchhod had the same view: “The household sector is bearing most of the brunt of the adjustment, as we expected.”

Tags: OCR forecasts

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Comments from our readers

On 3 October 2022 at 3:15 pm Winka said:
But hang on?
If INFLATION existed as claimed, why wouldn't we still be keen to buy houses as an investment, because we could then enjoy even more 'inflated' values?

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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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