OCR cuts by November prediction
Kiwibank’s economists are predicting the official cash rate (OCR) will start coming down by November.
Thursday, April 27th 2023, 2:47PM 
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In its latest economic report chief economist Jarrod Kerr says the bank is confident the inflation peak has been reached, with the annual rate now comfortably below 7%.
“We should see the final RBNZ rate hike next month. Although it’s not needed, the RBNZ will likely raise the cash rate by 0.25% to 5.5%, as telegraphed by the February Monetary Policy Statement.”
Kerr says Kiwibank is sticking to its call that any move beyond 5% will be a step too far. “We expect to see a material contraction in economic activity.”
He says the next move following next month’s decision will be rate cuts and the bank has pencilled in the first move to be made by November. It expects interest rate cuts by the end of the year.
“By then, we are likely to be in the middle of a mild recession — one organised by the RBNZ in order to tame inflation.”
Housing market effect
Kerr says the steep rise in interest rates continues to weigh on demand for housing.
The full force of the RBNZ’s OCR hike, and another expected to come next month, will be felt over the next six months.
The impact of the RBNZ’s heavy hand is already clear, with the national median price of a house swiftly dropping to $775,000 from the November 2021 peak of $925,000.
Kiwibank continues to forecast a peak to trough decline of a little over 20%. “There are still further falls to come, but we believe we are most of the way through the correction.”
Kerr expects the housing market to bottom out over the second half of the year and move toward some slight gains next year.
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