BNZ thinks floating rates about to rise
BNZ says that despite what the Reserve Bank is predicting the market has recently moved to price at least 50 basis points of Official Cash Rate (OCR) hikes in the coming 12 months.
"This is moving toward our own expectations of 75 basis points of hikes in the year ahead, following a first 25 point hike in March 2014."
BNZ believes the market under-estimates the pace of ‘normalisation’ of the OCR in coming years. "We see a steady progression of the OCR to a cyclical peak of 4.50%, by mid-2015."
Its view is based on the premise the economy is now showing broad-based strength, against the backdrop of limited excess capacity to absorb growth. This should lead to inflationary pressures down the track, as should the gradual decline in the NZD that we see unfolding next year. BNZalso sees potential for price pressures resulting from momentum in the construction sector to feed through to broader inflation.
Click the button below to subscribe and will have free unlimited access for a limited time to full article and all other articles on the site.
You will also be able to comment on articles on Good Returns.
