Expectations of rising interest rates are on the rise
According to Kiwibank economists, the recent surge in economic growth has increased the odds of an official cash rate hike in February.
Monday, June 21, 2021, 12:57 p.m.
Figures released last week revealed a 1.6% increase in first-quarter GDP growth, and the surprise numbers prompted the Kiwibank team to reassess their forecast.
Forecasters stuck to their prediction that OCR will start to rise in May, but say “there is a growing risk of an even earlier move in February.”
“Expectations of OCR hikes are moving towards an earlier take-off than what the RBNZ reported in the May MPS,” the bank said.
The team, led by Jarrod Kerr, said wholesale markets did not reflect the growing risk of rate hikes.
“From our perspective, all wholesale interest rates seem too low. And the Kiwi currency looks very weak. We expect interest rate expectations and the Kiwi dollar to rise sharply from there. ‘here.”
Kiwibank’s comments follow ANZ’s revision of its interest rate forecast last week. The bank tips for raising rates in February if the economy maintains its current trajectory.
Most economists now believe the central bank rate has bottomed this cycle.
The Reserve Bank’s own forecasts seem to confirm this. Its latest OCR track projects, OCR could increase from mid-2022, with gradual increases to 1.75% in 2024.
The RBNZ projection is conditional and may change depending on economic circumstances.
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