Rate rise almost a dead cert
Wholesale interest rate markets are fully pricing in a rate hike and economists agree that the Reserve Bank will raise its Official Cash Rate (OCR) from 6.25% to 6.5%.
Some economists see the risk of an even bigger hike along with further increases down the track. Macquarie Bank’s economists see a risk that the central bank may think the economy needs a stronger dose of monetary policy and will raise the OCR by 50 basis points to 6.75%.
Like other economists, they note that recent growth and inflation data slightly exceeded the Reserve Bank’s forecasts and that, with unemployment so low, it may be worried about wage inflation.
ASB Bank economist Kate Skinner says she doesn’t think the recent rise in the New Zealand dollar will have been sufficient to offset the stronger than expected data.
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