Economists are divided as to whether the Reserve Bank will raise interest rates on Thursday with a narrow majority expecting no change.
Wednesday, March 9th 2005, 6:12AM
by The Landlord
The latest Reuters survey shows eight of 14 economists expect no change to the official cash rate (OCR), currently a 6.5%, but six expect Reserve Bank governor Alan Bollard will raise the rate to 6.75%.
ANZ/National Bank recently changed its view and is now expecting a rate hike on Thursday and is also predicting a further increase in April. Economist Cameron Bagrie says the change of mind came when the bank updated its quarterly economic forecasts.
"We were nervous. When we went through this forecasting round it became blatantly clear just how persistent inflation is," Bagrie says.
"Our suspicion is that the Reserve Bank’s patience has run out." Inflation in calendar 2004 was 2.7% and ANZ/National is forecasting it will breach the central bank’s 3% upper limit this year.
It expects the economy will stay stronger than it expected for longer than it expected, exacerbating labour constraints and potentially increasing wage inflation.
