New Zealand economists divided over OCR

Leading economists at New Zealand’s biggest banks have played down the chances of an OCR rate rise next month — with one bank claiming a cut is more likely this year

Economists at Westpac, BNZ, ANZ, and Kiwibank predict the Reserve Bank will hold interest rates at a record low later this month. The OCR rate is still at 1.75% amid subdued economic growth and low inflation.

Westpac’s Chief Economist Dominick Stephens said it was “easier to imagine scenarios leading to an OCR cut” than a rise, and saw no scope for an increase this year. In its latest report to the market, Westpac said New Zealand could not be compared to the US, where inflationary pressures are expected to lead to a rate rise.

BNZ Senior Economist Craig Ebert said he did not expect a rate increase until February 2019: “There is a tide of better news around global economies, and even flutters of inflation, but the Reserve Bank hasn’t expressed any tendencies to jump on the bandwagon. Rates will go up eventually but we can’t expect it to any time soon. In the longer term, though, the cash rate needs to return to a sense of normality.”