OCR

New forecast sees the key interest rate hitting 4% earlier than the central bank previously predicted next year.

“A few details suggest the Reserve Bank has a greater propensity to keep hiking. “However, we remain of the view that tightening is unlikely to continue into next year. And I know that the monetary policy committee sleep straight at night. “Retaining integrity is really important to us here at the bank. The record of the meeting noted there was talk about whether or not to lift by more than 50bp, which flags where the Reserve Bank sees the risks around the OCR at the moment,” he said. “The statement sounded a bit more downbeat about the outlook for activity as the bank sharply revised lower its forecast for residential investment, which it now expects to fall by a cumulative 6% over the coming quarters,” he said. Its previous monetary policy statement in May had implied the OCR would only reach its peak by the middle of next year and would stay at about 4% until late the following year, before then starting to slowly drop. The Reserve Bank hiked the official cash rate by 50 basis points to 3% on Wednesday as it continued to tighten monetary policy to bring down inflation. Orr said the role involved receiving “feedback and criticism” and it was important the bank was seen as a learning institution, “which we are”. The bank would be conducting a review of its monetary policies over the past five years and that would involve seeking the views of independent overseas experts, he said, adding that he didn’t want to prejudge the outcome of that review. Orr said he did regret that people were experiencing “the ongoing tails of Covid and current high inflation” but said the role of the bank was “about playing the cards that are in your hand at the time, as best as you can through time”. Speaking at a media conference explaining the Reserve Bank’s latest monetary policy statement which saw the central bank raise the official cash rate by 50 basis points to 3%, Orr said his candidacy was not something he wanted to talk about.