Economists at war over OCR forecasts
ANZ suggests the RBNZ will rise three times this year. Kiwibank says "reckless" rate hikes unwarranted.
Wednesday, April 15th 2026, 7:27PM
by Sally Lindsay
Kiwibank economists have hit back at recent calls for OCR hikes saying they are unwarranted, reckless and could potentially induce a recession by adding costs in the cost-of-living crisis.
ANZ recently predicted three OCR rises this year saying it sees the RBNZ becoming too uncomfortable with an OCR in stimulatory territory as inflation inevitably rises because of the US and Israel war with Iran.
Any interest rate rises risk a repeat of past mistakes and any suggestion they should be raised is tone deaf, Jarrod Kerr, Kiwibank chief economist and Alexandra Turcu, economist say.
“The war in the Middle East isn’t over yet. And we don’t know when it will end. And even when it does, it will take months to return to normal.”
Trump’s failed peace talks over the weekend have the economists worried how Kiwi businesses are meant to weather yet another punch in the guts from inflated fuel prices. Peace talks are expected to start again in a few days.
Kiwibank says the heightened uncertainty is causing businesses and households to bunker down. Both businesses and households are struggling with increased costs, not surging demand.
Any rise in the costs of essentials will feed into inflation short term, but cost increases will push demand down and put down-ward pressure on growth, Kerr and Turcu say.
The country is likely to see a contraction in economic activity in the current quarter. “And we won’t see this played out in the data for months to come. Second quarter CPI data isn’t out until July, after the RBNZ’s decision, and to know if inflation sticks around, we really need to see third quarter data at the very least.
“Households and businesses who’ve already seen their costs rise don’t need a rise in interest rates to dampen their demand – because this is not a demand story, this is not Covid,” Kerr says.
“We speculate over the length of the conflict and already, we are looking to 2027 for an economic recovery – it feels like this year is similar to last.
Uncertainty is up, prices are up, and the only logical next step is for demand to bottom out. We see little risk of inflation becoming imbedded in the economy through wages.
The RBNZ have been clear on one thing, which is there won’t be any knee-jerk reactions from it. The central bank doesn’t feel pressured to pick a move too early, and we agree.
Any move by the RBNZ should be to watch, wait, and weigh up the facts once it has the information in front of it.
Doomsday talk
Meanwhile BNZ’s prediction that house prices might fall to 2016 levels of 30% below the 2021 peak have been dismissed as a “throw away line”.
The lengthening conflict in the Middle East prompted the BNZ to rework its macro forecasts and the bank’s chief economist Mike Jones says the country is now looking at a weaker economy, higher inflation, a delayed labour market recovery and slightly higher mortgage rates.
However, adviceHQ director and mortgage adviser David Green says that sort of commentary doesn’t help anyone.
“If it was to become anywhere reality, the bank would have stopped lending at LVRs of 80-90%. It wouldn't loan to anyone above a 70% LVR because it would be under water. And, I don't think the stress testing even goes that far with the Reserve bank.”
“This is just economists’ doomsday talk.”
Green says he is sure someone said that back10 years ago as well and look what happened.
| « ANZ goes out on a limb and predicts three OCR rises this year |
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