The Reserve Bank inched one small step closer to hiking the OCR when it delivered its Monetary Policy Statement last Thursday. This time the likely OCR hiking cycle was described as taking place “next year”, compared to the July missive which referred to an unspecified date “in the future”. However, the RBNZ did reiterate its expectation that the OCR would be unchanged through 2013.
Compared to the pallid series of OCR hikes that was projected in the June MPS, last week’s statement projected a substantial tightening cycle beginning around April next year and proceeding at a pace equivalent to one OCR hike per quarter. By the early 2016 cut-off for the published forecasts, the 90-day rate is projected to be at 4.7% (and rising) – a full 50 basis points higher than what was projected in June.
The RBNZ is sounding increasingly confident that the New Zealand economy has entered a sustained upswing, aided by a construction boom and further propelled by rising house prices. It estimates that activity has now by and large returned to its noninflationary ‘potential’ level, and will rise above this point in coming years, putting more upward pressure on wages and prices.
Read the full report: Market Research
Westpac