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New Zealand economists divided over OCR

Top economists say rate could rise in November — or be cut this year.

Tuesday, March 6th 2018, 11:13AM

by Dan Dunkley

Leading economists at New Zealand’s biggest banks have played down the chances of an OCR rate rise next month — with one bank claiming a cut is more likely this year

Economists at Westpac, BNZ, ANZ, and Kiwibank predict the Reserve Bank will hold interest rates at a record low later this month. The OCR rate is still at 1.75% amid subdued economic growth and low inflation.

Westpac’s Chief Economist Dominick Stephens said it was “easier to imagine scenarios leading to an OCR cut” than a rise, and saw no scope for an increase this year. In its latest report to the market, Westpac said New Zealand could not be compared to the US, where inflationary pressures are expected to lead to a rate rise.

BNZ Senior Economist Craig Ebert said he did not expect a rate increase until February 2019: “There is a tide of better news around global economies, and even flutters of inflation, but the Reserve Bank hasn’t expressed any tendencies to jump on the bandwagon. Rates will go up eventually but we can’t expect it to any time soon. In the longer term, though, the cash rate needs to return to a sense of normality.”

ANZ economists Sharon Zollner and Philip Borkin said they did not expect “the first OCR hike until August next year, and it could be even later than this”.  ANZ added the 1 year rate currently offered the most value to customers, as it was the low point on the mortgage curve.

The ANZ economists added: “While the gap to the 2-year rate is not large, and may be attractive for those concerned about the possibility of the OCR moving up within the next year, that is not our expectation.”

However, Kiwibank Senior Economist Jeremy Couchman said a rate increase could come this year, along with rising inflation. Couchman said: “Broadly, we expect the OCR to remain at 1.75% until November before gradually lifting. An increase in government expenditure in the second half is likely to add to inflationary pressure.”

Tags: OCR forecasts

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
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
China Construction Bank Special - 3.19 3.19 3.19
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Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
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 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
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
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

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