![]() ![]() Recent economic data have started to move in the RBNZ's favour. "OCR cuts certainly do not seem to be on the radar for the RBNZ right now," Eckhold said. The new government’s fiscal projections in the HYEFU before Christmas will also be a key focus." Key will be migration and housing market indicators over the next few months and the next couple of CPI outturns. "Our overall first impression is that the RBNZ is concerned that further increases in interest rates may be required towards the middle of 2024. The RBNZ’s forecast for house prices was revised up from 4.3% to 5.5% for 2024 reflecting these pressures."Įckhold said the statement of record also noted that government investment looks set to be stronger in line with pre-election forecasts, which also adds to medium term demand concerns. "A key driver is increased concern that migration and population would drive increased demand and medium-term inflation pressures. Westpac chief economist Kelly Eckhold said the most notable changes in the press statement and meeting record was increased concern that inflation would remain persistent with upside risks from upwardly revised forecasts. Therefore wholesale interest rates reacted sharply, with the two-year swap rate, for example rising by 12 basis points to 5.25%. Wholesale interest rate markets have been 'pricing in' a first cut to the OCR by August of next year and as of earlier on Wednesday before the OCR announcement were pricing in three cuts by early 2025. The NZ dollar immediately rose by about half a cent to US62c, although then started to weaken again a little. ![]() ![]() Indeed there was a swift market reaction. This will come as a 'hawkish' surprise for a market that has already been factoring in OCR falls next year. Effectively this means the RBNZ sees a fair chance of another hike. It is now forecasting a peak OCR of 5.69% in the September quarter of 2024. The RBNZ is clearly becoming concerned about the potential impact of surging inbound migration and makes numerous references to this in both the media statements and the November Monetary Policy Statement.Īll eyes on Wednesday were always going to be on the 'forward track' forecast the RBNZ has for the possible future level of the OCR - and it is here that the RBNZ has thrown in a big surprise. The statement from the RBNZ Governor Adrian Orr was much more 'hawkish' than expected and seems aimed firmly at dampening down speculation that interest rates may soon be falling. The Reserve Bank (RBNZ) has again left the Official Cash Rate (OCR) unchanged on 5.5%, but is warning that if inflation proves stronger than expected it may have to raise rates again in future. ![]()
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