One OCR hike pencilled in by Westpac

Although the RBNZ indicated in November it had probably finished its OCR cuts and the financial markets turned immediately to the timing of possible hikes and long-term interest rates rose, Westpac chief economist Kelly Eckhold says there is still a lot of water to go under the bridge.

He says it seems clear the RBNZ was not seeking a significant tightening in financial conditions and is now sending the signal that market pricing of OCR increases had run significantly ahead of the data and RBNZ thinking.

Comments from new RBNZ governor Dr Anna Bremen about the central bank seeing inflation falling and growth that is lasting has led to market pricing shifting out again and expectations of just one OCR hike this year.

Eckhold says the governor taking the rare step of commenting on monetary conditions outside of the usual window that follows a Monetary Policy Statement (MPS) or review, is a welcome move and he hopes it will continue.