Rates may not rise as quickly as expected: Economists

All but one of the economists surveyed by mortgagerates.co.nz this week expect the official cash rate to be lifted by 25 basis points next week.   But many expected only two more increases throughout the rest of the year.

Tom Kennedy, of JP Morgan, said he thought it was a 50/50 call whether the rate was increased in June or July. But, he said, given the data that has come out recently, it looked more likely that the Reserve Bank would wait until July to increase the rate to 3.25%.

“Our overarching view for a while has been that they can take the opportunity to issue a lower inflation growth forecast going forward and it would look a bit funny if they raised rates with that background.”

BNZ agreed there were increasing risks that the interest rate hiking would not be as aggressive as the Reserve Bank previously signalled, because of the dollar being higher than anticipated.  “Lower current inflation adds to this risk. We will be most interested in any discussion around the NZ dollar or commodity price interface and its implications for the OCR outlook ahead.”