by Paul McBeth
Interest rates come under the spotlight this Wednesday, as the Reserve Bank releases its latest quarterly Monetary Policy Statement and reviews the Official Cash Rate. As that rate has a direct bearing on floating and shorter-term fixed rate mortgages, here's a quick round-up of what the pundits are expecting.
Anthony Byett, Economist, ASB Bank
"There is still the strong chance that the RB will raise the current 6.5 per cent cash rate to 6.75 per cent, either (on December 6) or in early 2001.
"While the growth rate in the US is decelerating, growth in New Zealand is only just re-emerging. The low New Zealand dollar has created a stimulatory environment for New Zealand producers and this is expected to feed through to three per cent higher output levels next year (meanwhile the US is headed for a two per cent growth rate). At the same time, inflation is already above the three per cent target...and is likely to remain relatively high throughout 2001.
"Rather than risk an even higher and more persistent bout of inflation, the RB could soon nudge the cash rate higher."
Cairns Lockie, Mortgage Bankers
"The factors that may cause an increase (in the OCR) are rising inflation, increased retail spending and rising wage rounds. Factors that will keep the cash rates at their current levels include slower than expected economic growth and a generally less robust economy.
"We have talked with a number of financial commentators and the consensus view is that the cash rate will remain unchanged. The market, with the recent easing of the bond yields, is saying the same thing."
Ulf Schoefisch, Chief Economist, Deutsche Bank (Global Markets Research)
"We expect the RB to leave the OCR unchanged at 6.5 per cent on December 6, but maintain its projection of a further rise in 90 day rates over the next year.
"The Trade Weighted Index depreciation since the August Monetary Policy Statement - around eight per cent - is causing significant additional inflation pressure. As a result, we expect the RB to revise the forecast peak of the CPI cycle from 2.9 per cent to 3.6 per cent.
"Based on the assumption of falling oil prices and a strengthening New Zealand dollar (based partly on a significant current account improvement), the RB is likely to maintain its projection of a relatively rapid decline of CPI inflation from its peak to an annual rate of two per cent by early 2002."