Mortgage rate cuts a way off yet

Inflation looks unlikely to be back within the Reserve Bank’s 1-3% target band before the latter part of next year.

The Consumers Price Index fell in the June quarter from 6.7% in the first quarter and while there have been some big swings in some specific prices, the bigger focus for the RBNZ is the longer-term trend in prices.

Although the activity front shows signs demand is cooling, including sluggish retail spending, the economic cycle may still have some legs (such as the turnaround in net migration and signals the housing market may be heating up again), says Satish Ranchhod, a Westpac senior economist.

“Putting this all together, we continue to see the risk that the RBNZ will need to raise the OCR again.”