Wheeler's message could backfire: Economists
Governor Graeme Wheeler hiked the OCR to 3.5% this morning and made it clear that the bank expects to leave it there for a while. “It is prudent that there now be a period of assessment before interest rates adjust further towards a more neutral level,” he said.
Westpac’s economists said the pause signal had been expected. But they said they sensed a market overreaction, and that interest rates could fall.
“Whereas the RBNZ intends this to be a hiatus within a broader trend of a rising OCR, markets are starting to doubt the entire nature of the hiking cycle,” they said.
They said the risk was that fixed mortgage rates would fall to levels that the RBNZ would be uncomfortable with, and it would have to “correct” market pricing.
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