Economists divided on rate rise this week
Economists are almost evenly divided on whether Reserve Bank governor Alan Bollard will raise rates on Thursday but they still expect him to be talking tough.
Sunday, April 22nd 2007, 9:41PM
by Jenny Ruth
A Reuters poll of 15 economists last week found that eight are expecting Bollard to hike rates. Of those who don’t expect a rate rise this week, all but three are expecting he will hike by June.
"You could make the sweeping comment that all the data flow since March has surprised on the positive side," UBS economist Robin Clements says.
"The only two items that argue against a rate hike are the currency and fixed mortgage rates.
The New Zealand dollar has soared to post-float record levels while fixed mortgage rates have jumped sharply recently.
Nick Tuffley, chief economist at ASB Bank, says that it was the latest figures from the New Zealand Real Estate Institute that was the tipping point to him picking a rate rise.
Those figures showed the national median house price jumped 13.7% in March from a year earlier. The pace of annual price inflation has been building through the last few months of last year from just 7.9% in September.
"We’ve got very, very clear numbers that the momentum’s not slowing, it’s picking up," Tuffley says.
Brendan O’Donovan, chief economist at Westpac, says that Bollard should wait next week to see what impact the high currency and the recent rise in longer-term interest rates will have on activity, but he’s still expecting a further two rate hikes before year’s end.
"Now that the economy has gained momentum, it will take a lot to cool it down," O’Donovan says.
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