OCR

2022 - 5 - 25

Reserve Bank expected to lift OCR to 2% amid surging inflation (1 News)

The Reserve Bank is set to raise its benchmark interest rate to its highest level in six years as it rejoins the battle with surging inflation.

The "neutral setting" is regarded as the level at which the OCR is neither over stimulating the economy nor suppressing growth, although the cash rate is expected to hit at least 3% in the short term as the RBNZ tackles the current spike. ASB Bank economist Mike Jones said the RBNZ could afford to give "no quarter" to inflation and the need to get it under control as soon as possible. The Reserve Bank is set to raise its benchmark interest rate to its highest level in six years as it rejoins the battle with surging inflation.

Reserve Bank hikes official cash rate to 2% (Stuff.co.nz)

New Reserve Bank forecasts suggest the OCR could climb as high as 4% by June next year.

“Admittedly, its forecasts have rate cuts pencilled in, in 2024, a little later than our own forecast. “We have been forecasting that this housing downturn would force the Reserve Bank to reverse course and cut rates in 2023,” he said. “Now the Reserve Bank has no choice but to increase the OCR, pushing up interest rates across the whole economy and creating more pain for mortgage holders.” The Reserve Bank is forecasting annual inflation will reduce to 4.4% by March next year and drop to 2.5%, within its target band, a year after that, but it is forecasting unemployment will rise gradually to 4.7% by March 2025. A silver-lining for mortgagees is that the Reserve Bank now sees light at the end the tunnel, and is forecasting the OCR to start falling towards the end of 2024. The Reserve Bank explained the size of its rate-hike by saying “a larger and earlier increase in the OCR reduces the risk of inflation becoming persistent, while also providing more policy flexibility ahead in light of the highly uncertain global economic environment”.

OCR now at six-year high of 2% (Otago Daily Times)

The Reserve Bank has announced another hike of the official cash rate, raising it by 50 basis points to a six-year high of 2%.

The Committee agreed to continue to lift the OCR at pace to a level that will confidently bring consumer price inflation to within the target range. Asset prices, in particular house prices, have also declined, reflecting in part higher mortgage interest rates and increased supply of housing. The reduction in COVID-19 health-related restrictions is also enabling increased economic activity, including hospitality and tourism. The broad-based tightening in global monetary and financial conditions is acting to slow spending growth, accentuated by the high costs of basic food and energy staples. Asset prices, in particular house prices, have also declined, reflecting in part higher mortgage interest rates and increased supply of housing." Consistent with the economic outlook and risks ahead, monetary conditions need to act as a constraint on demand until there is a better match with New Zealand’s productive capacity.

OCR rate: Luxon accuses govt of 'lost formation' on financial discipline (RNZ)

The National Party leader says interest rates will have to go up because of the government's wasteful spending.

If it went any higher, they would be "engineering some sort of recession", he said. I don't know what problem the government is trying to solve... I'm just confused as to why the government is doing it." "I think it's going to take some time for things to turn around" - Kiwibank chief economist Jarrod Kerr "There's something in the middle called delivery, execution and implementation and they just don't know how to get things done." He would prefer the Reserve Back was "fixated" on getting inflation back to the 1 percent to 3 percent band, however, Treasury was forecasting it wouldn't get back to 3 percent until 2025.

OCR decision: Reserve Bank continues hike path as official cash ... (Newshub)

The official cash rate (OCR) has reached 2 percent, increasing by another 50 basis points. It's now at its highest level since 2016.

OCR up 50pts: Here is what the bank said - Good Returns (goodreturns.co.nz)

Why the RBNZ hiked the OCR 50 basis points. Wednesday, May 25th 2022, 2:00PM. The Monetary Policy Committee today increased the Official Cash Rate (OCR) to ...

5.45 5.45 5.45 5.45 5.45 The Committee agreed to continue to lift the OCR at pace to a level that will confidently bring consumer price inflation to within the target range. Employment remains above its maximum sustainable level, with labour shortages now the major constraint on production. Asset prices, in particular house prices, have also declined, reflecting in part higher mortgage interest rates and increased supply of housing. The reduction in Covid-19 health-related restrictions is also enabling increased economic activity, including hospitality and tourism. The broad-based tightening in global monetary and financial conditions is acting to slow spending growth, accentuated by the high costs of basic food and energy staples. Consistent with the economic outlook and risks ahead, monetary conditions need to act as a constraint on demand until there is a better match with New Zealand’s productive capacity. The pace of global economic growth is slowing.

Watch: OCR now at six-year high of 2% (Otago Daily Times)