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ANZ Bank now sees cash rate peaking at 3%

ANZ Bank said the peak in the official cash rate will now be 100 basis points higher than it expected, hitting 3% by April 2023, as inflation ramps up and the labour market remains tight.

Wednesday, January 19th 2022, 6:50PM

by BusinessDesk

“Assuming no abrupt developments such as a sharp re-pricing of risk globally (which we consider a very real risk, albeit an unforecastable one), we now believe the RBNZ will need to keep on hiking right on through our previous forecast of 2%,” said chief economist Sharon Zollner.

The official cash rate (OCR) is currently at 0.75%. The next cash rate review is on Feb 23, when the Reserve Bank of New Zealand (RBNZ) will publish a full monetary policy statement with forecasts.

“We now see a peak in the OCR of 3%, with the RBNZ raising in steady 25bps steps to get there,” she said.

According to Zollner, next week’s fourth-quarter inflation print could be closer to 6% or higher than the 5.5% that she had been expecting.

“Inflation will probably rise yet further in coming quarters, with global and domestic drivers taking longer to rein in than anticipated.”

Not only that but “it’s become increasingly clear that the current labour market is not consistent with low and stable inflation and things will only intensify from here”.

A surge in hiring in November points to a roughly 3% unemployment rate in the fourth quarter and “if that happened, an unemployment rate with a 2-handle could be imminent”, she said.

She underscored, however, “it is important to note that we are not forecasting more OCR hikes because we think the NZ economy has a lot more upside growth surprises left in it. On the contrary, we expect growth to be fairly insipid”.

Why?

Anecdotally, the housing market has come to a sudden stop, due to a policy shock to credit availability and sharply higher mortgage rates, she said.

Higher mortgage rates will directly reduce discretionary spending and supply-side constraints, not least labour shortages, which are not growth-friendly.

Finally, omicron is on our doorstep, she said.

Despite all that “the reality of a prolonged negative supply-side shock is that even modest growth can stretch resources and cause inflation".

"The trade-offs are unpleasant and there’s no way around that,” she said.

« Low key CCCFA enquiry startsNon-bank lenders add their voice to over CCCFA woes »

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora ▲5.43 ▲4.57 ▲5.58 ▲5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 ▼5.14 6.05 6.15
TSB Special 4.79 ▼4.34 5.25 5.35
Unity 5.65 ▲4.80 ▲5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 16 May 2022 9:03am

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