One OCR hike pencilled in by Westpac
Westpac economists reckon there will be just one OCR hike this year and have pencilled it in for December after the election.
Tuesday, January 13th 2026, 10:20AM
Although the RBNZ indicated in November it had probably finished its OCR cuts and the financial markets turned immediately to the timing of possible hikes and long-term interest rates rose, Westpac chief economist Kelly Eckhold says there is still a lot of water to go under the bridge.
He says it seems clear the RBNZ was not seeking a significant tightening in financial conditions and is now sending the signal that market pricing of OCR increases had run significantly ahead of the data and RBNZ thinking.
Comments from new RBNZ governor Dr Anna Bremen about the central bank seeing inflation falling and growth that is lasting has led to market pricing shifting out again and expectations of just one OCR hike this year.
Eckhold says the governor taking the rare step of commenting on monetary conditions outside of the usual window that follows a Monetary Policy Statement (MPS) or review, is a welcome move and he hopes it will continue.
Westpac’s forecasts remain for a gradual easing in inflation from its existing 3% level and to be comfortably inside the RBNZ’s target band by the middle of this year.
A key reason for that is the continued softness in housing related costs, which are the biggest component of the CPI.
Annual rental inflation has slowed to its lowest levels since 2010. And with continued increases in housing supply and low population growth, the bank’s economists expect rental growth will remain subdued for some time.
Similarly, construction cost inflation has slowed sharply over the past year, and it is likely to remain muted in the early part of 2026.
Smoothing through the usual month-to-month swings, the broader picture in New Zealand’s housing market is one of limited momentum. Sales have been tracking sideways.
“While we’re seeing mixed trends in prices around the country, the overall picture has been flat since mid-2023,” Eckhold says.
“This continued softness is especially notable given the large falls in interest rates over the past year.
“However, those interest rate falls have occurred at the same time as we’ve seen a big increase in the number of properties for sale. In fact, adjusting for normal seasonal trends, the number of homes available for sale is at its highest level in a decade.”
He says only modest house price growth is expected over the year ahead and continued softness for at least the early part of the year.
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