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New Zealand

ANZ forecasts 3 more rate hikes from Reserve Bank

The Reserve Bank could raise the OCR to 4.75 by May next year, according to ANZ.

The economy’s stubborn resilience has prompted the country’s largest bank to forecast more aggressive rate hikes from the Reserve Bank (RBNZ).

ANZ economists expect the Official Cash Rate (OCR) to rise three more times by 25 basis points to a peak of 4.75% in the February, April and May financial reviews.

Previously, it peaked at 4% at the end of the year.

Chief Economist Sharon Zollner said recent data show that Surprisingly Strong Second Quarter Growth and latest reading from manufacturing Confirmed that more action is needed to cool the economy.

“The economy is not recovering as tight labor markets and strong wage growth are partially offsetting the impact of higher interest rates. The weaker New Zealand dollar is also meant to offset current financial conditions.” Stated.

Zorner said he wasn’t “bullish” about the growth outlook, but the need to tackle inflation prevailed above all else.

“Risks are firmly skewed towards inflation, and the OCR will do more work as inflation expectations have not fallen as much or as quickly as needed to bring real interest rates to sustained contractionary levels. is needed.”

need cooling

ANZ Chief Economist Sharon Zollner.

Sharon Zollner
Photo: RNZ / Dom Thomas

Zorner said the RBNZ hopes to increase unemployment by about 5% and cut household spending to cool demand, creating slack in the economy.

But while the RBNZ has consistently raised the OCR since October last year, raising the OCR from 0.25% to 3% through a series of massive 50 basis point rate hikes, Zollner said those increases have worked. He said he doubted whether

“Overall, the growth profile has not been strong, but beyond the housing market, it is not clear that the rate hikes implemented so far have been successful in opening up much of the economy’s spare capacity. should be significantly reduced.”

She said people were coping with higher interest rates due to full employment and strong wage growth.

Zorner said ANZ’s demands were off the mark as supply chain disruptions eased, labor shortages eased and consumer spending returned to more normal pre-corona patterns. I acknowledged that the price increase may not be necessary.

Conversely, however, a slowdown in the global economy and aggressive interest rate hikes by the US Federal Reserve were upside risks.

She ruled out the possibility of OCR being cut any time soon.

https://www.rnz.co.nz/news/business/474927/anz-forecasts-another-three-rate-rises-from-reserve-bank ANZ forecasts 3 more rate hikes from Reserve Bank

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