Summarised by Centrist
Economists at New Zealand’s five largest banks expect the Reserve Bank to raise the Official Cash Rate by 0.25 percentage points on Wednesday, taking it from 2.50% to 2.75%. Their agreement largely ends there.
BNZ expects the OCR to rise at every meeting until it reaches 4% in May 2027, well above the path forecast by the other banks and the Reserve Bank’s previously modelled peak of about 3.3%.
Kiwibank chief economist Jarrod Kerr describes Wednesday’s expected increase as the “second in a likely 3-step move to 3%”. He expects another rise in October, followed by a pause.
ASB expects increases in September, October and December, taking the OCR to 3.25% by the end of 2026. Westpac also sees a move towards 3% but says further increases are less certain and should depend on incoming economic data.
BNZ is considerably more hawkish. Head of research Stephen Toplis expects the OCR to rise by 0.25 percentage points at each meeting until it reaches 4% in May. BNZ believes the Reserve Bank’s updated forecasts will show a much lower peak of about 3.3%, but says the actual tightening cycle will ultimately go further.
The Reserve Bank is confronting inflation of 4.1%, above its 1% to 3% target range, while unemployment has reached 5.6%, its highest level in more than a decade.
Westpac warns that the economic recovery remains “fragile” and says policymakers should not assume improving conditions will continue. ANZ says recent economic data has been “mildly dovish”, but still expects increases in September and October.
ANZ also says the Reserve Bank may prefer to make an October increase a “virtual lock” to reduce uncertainty immediately before the November 7 election.
Re-published from the Centrist with permission
