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Banks bringing OCR cut expectations forward

ASB is joining Kiwibank in expecting OCR cuts starting from November this year.

Friday, July 5th 2024, 9:33AM

In its preview of this month’s RBNZ Monetary Policy Review, the bank says cracks in households are starting to spread – inflation will be next.

Monetary policy has been leaning hard against inflation for over two and a half years and too many times, the RBNZ has been surprised by how high inflation has remained.

But ASB chief economist Nick Tuffley says the bank’s assessment is the dynamic is changing quickly this year. Households are starting to buckle more noticeably under the various pressures of high interest rates and high (though easing) living cost inflation.

“To date the labour market has been a bit of a saviour, with employment holding up and wage growth relatively stronger.”

Tuffley says even that story is starting to change, with cost-cutting pressures in organisations, wage growth slowing, and job security worries on the up.

“Crucially, we are starting to see inflation indicators soften with more alacrity. We are more confident inflation will be comfortably back in the target band by year end.”

He says now the biggest risk of regret for the RBNZ is rapidly tilting to the risk of holding monetary policy too tight for too long, unnecessarily damaging the economy and people’s employment prospects.

“We expect the RBNZ will start cutting the OCR this year – in November, after it has digested the third quarter CPI and labour market releases in October and November.”

This month’s OCR announcement may be too soon to see much shift in the RBNZ’s balance of inflation risks, Tuffley says.

The bank expects there will be much greater detail at this month’s meeting of how the Monetary Policy Committee assessed the state of inflation and its statement as an opportunity for the RBNZ to signal its assessment of the Budget impact on inflation.

“We saw the front-loading of tax cuts relative to spending cuts as unhelpful to the RBNZ, but nonetheless don’t see the fiscal stance as a blocker for OCR cuts this year – particularly with further fiscal restraint already signaled,” he says.

Tags: ASB

« Massive liberalisation of planning rules to end housing woesReserve Bank expected to stick to its knitting »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 ▼7.45 ▼7.09 ▼6.95
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - ▼6.85 ▼6.49 ▼6.35
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 ▼7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼6.89 6.75 6.39
Median 8.64 7.14 6.82 6.65

Last updated: 18 July 2024 10:19am

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