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RBNZ tipped to raise rates on Thursday

Once again, economists are unanimous in their expectation that the Reserve Bank will hike interest rates for a fourth time this year when it reviews the Official Cash Rate (OCR) on Thursday.

Sunday, July 25th 2004, 8:14PM

by Jenny Ruth

The OCR, which directly influences bank’s floating mortgage rates, is currently at 5.75% and the RBNZ is expected to raise it to 6%.

"Everybody’s picking a rate hike and the market is fully pricing in a hike," Deutsche Bank senior economist Darren Gibbs says.

In the wholesale market on Friday, the 90-day bank bills were trading at 6.28%. The rule of thumb is that floating mortgage rates are usually about two percentage points higher.

Since the Reserve Bank released its previous monetary policy statement "all the data that matters has been stronger than expected," Gibbs says. That was particularly true of the growth figures which showed the economy grew 2.3% in the March quarter, bringing annual growth to 5%. Economists had expected the quarter’s growth had been about 1.5%.

"It’s hard to see the bank being less hawkish than it was in June," Gibbs says.

Macquarie Bank suggests that the sharp acceleration in annual inflation from 1.5% in the year ended March to 2.4% in the year ended June may unnerve the Reserve Bank sufficiently that it raises the OCR 50 basis points to 6.25% on Thursday.

ASB Bank economist Kate Skinner says there are no signs that inflation pressures will be alleviated in the short-term. "Inflation is already forecast to be above 3% throughout 2005. Therefore, the Reserve Bank has little headroom to absorb any additional inflation pressure," she says. The central bank is pledged to maintain inflation between zero and 3% over the medium term.

Skinner expects there’s a greater than even chance of further rate hikes the next two times the Reserve Bank reviews the OCR, bringing the benchmark rate to 6.5%.

Bank of New Zealand’s economists don’t think the central bank will be quite as hawkish, picking that the OCR will peak at 6.25% in September. They says that any pause in raising rates now might give the housing market a second wind, an outcome the Reserve Bank wouldn’t want.

Westpac economists say the main reason for any hesitation in raising rates is that the New Zealand dollar has been slightly higher than the Reserve Bank expected, but that will be insufficient to stay its hand.

« Figures suggest modest housing slowdownRBNZ raises OCR 25 basis points »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 3.95 4.15 4.49
ANZ Special - 3.45 3.65 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - 3.49 3.55 3.89
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
Lender Flt 1yr 2yr 3yr
China Construction Bank Special - 3.19 3.19 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.65 4.80 -
HSBC Premier 5.24 3.54 3.20 3.69
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank 5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Lender Flt 1yr 2yr 3yr
Pepper Money Near Prime 5.64 - 5.44 5.44
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
Lender Flt 1yr 2yr 3yr
TSB Bank 6.09 4.19 4.35 4.69
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society 5.50 3.95 4.05 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.55 3.99
Median 5.34 3.96 4.09 4.39

Last updated: 21 February 2020 4:32pm

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