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Economists lean towards OCR hike next month

Kiwibank economists have joined their peers in calling for an official cash rate increase next month as the economy displays signs of overheating. 

Monday, July 19th 2021, 4:50PM

Data released last week revealed that inflation has soared to a ten-year annual high of 3.3%, with cost increases across housing, transport, food and construction.

With unemployment low and the economy running hot, economists at Kiwibank believe the Reserve Bank's Monetary Policy Committee and governor Adrian Orr (pictured) should take action. 

"The next move is almost certainly a rate hike," the team said. "The 'least regrets' stance is firmly favoured. We now expect the RBNZ to lift the cash rate in August (a little over four weeks from now), in what will be the first of at least three hikes from here.

"We’re likely to see two hikes by year end, and a push to 1% by February."

While the analysts believe the RBNZ will raise the OCR by 75 basis points by February, further hikes will depend on the "sensitivity of the economy coming off record low rates", the team said.

"We have pencilled in another lift in the cash rate to 1.5%, but that’s likely to be all we see in the near-to-medium term. An earlier lift off from the RBNZ will (hopefully) mean less work will need to be done to restrain the economy in the future."

ASB's team has also pencilled in successive rate hikes in August and November, but says the central bank will stick to a "gradual pace", given the "lingering uncertainty" of Covid.

Like Kiwibank, ASB analysts predict a "relatively low" OCR endpoint of 1.5% in the coming cycle.

BNZ's team have also weighed in on the pace of rate increases to be expected over the next year. 

The bank's team, including head of research Stephen Toplis, say there is "an increasingly viable" argument for a 1% OCR by November, with hikes in August, October and November.

The team suggested that the central bank could spring a surprise with a 50 basis point increase in the coming months.

Tags: economy inflation OCR OCR forecasts

« Small investors pull backClient concern over rate rises »

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.95 3.29
ANZ 4.44 3.10 3.50 3.84
ANZ Blueprint to Build 1.68 - - -
ANZ Special - 2.50 2.90 3.24
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.55 2.95 3.29
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.55 2.95 3.25
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 3.15 3.22 3.85
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 1.95 1.85 2.35 2.45
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 ▲2.29 ▲2.69 ▲2.99
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 3.34 3.34 4.14
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 2.49 2.49 3.29
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.69 2.99 3.29
SBS Bank Special - 2.19 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.29 - -
The Co-operative Bank - Owner Occ 4.40 2.49 2.89 3.19
The Co-operative Bank - Standard 4.40 2.99 3.39 3.69
TSB Bank 5.34 3.30 3.69 4.04
TSB Special 4.54 2.50 2.89 3.24
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.59 3.15 3.49 3.89
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.89 3.29
Median 4.54 2.68 2.99 3.29

Last updated: 29 July 2021 9:04am

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