What the RBNZ's surprise OCR hike means for home loan rates

The Reserve Bank surprised everyone yesterday hiking the official cash rate 50 basis points instead of the predicted 25 points.

It has made economists revise their forecasts for the next OCR announcement. Here’s what some of them are saying:

• ASB: We have pencilled in a final 25bp OCR increase to 5.5%
• ANZ: we still expect a 25bp hike at the May MPS, but this now takes the OCR to a peak of 5.5%. We then expect a long period on hold, and have pencilled in three cuts in late 2024 taking the OCR back down to 4.75%. Obviously that’s a hat-tip rather than a firm expectation.
• BNZ: Frankly, we are bamboozled as to what to forecast for the next meeting, in May. We think the RBNZ has done more than enough to impact the things that it can impact. We believed that before today’s bombshell. On that basis, we are strongly tempted to stick with our view that the cash rate peaks at 5.25% and, hence, assume rates are unchanged at the May meeting.
• CoreLogic: A reasonable assumption for now seems to be that we get one more 0.25% rise on May 24, with the tightening cycle potentially ending there.
• Kiwibank: We must expect a 25bp move to 5.5% in May.

“Even if it is a step too far, it’s a step they are clearly willing to take (and they can mop up afterwards). We continue to highlight the risk of overtightening. The reality of which rises with every move.”