Economists disagree on Wednesday's rate call, but agree hikes are coming eventually
New Zealand's major banks are heading into Wednesday's Reserve Bank decision with a clear split between economists and the market.
Kiwibank, ASB, and Westpac all expect the RBNZ to hold the official cash rate at 2.25%, pointing to the rapid retreat in oil prices and an easing Middle East conflict as reasons for the central bank to wait for more data.
Market pricing disagrees, with wholesale rates implying odds of a hike ranging from roughly two-thirds to as high as 80% by some measures. Not every bank is in the hold camp either. BNZ head of research Stephen Toplis has been explicit about where he stands, saying "interest rates need to be raised towards neutral as soon as possible," while ANZ is forecasting an outright hike to 2.50% this week.
Kiwibank was blunt about where it stands. "We hold to our view that holding the cash rate is the right decision," the bank said, arguing that falling oil prices have eased inflation risk while sliding house prices leave homeowners feeling poorer and less inclined to spend.
ASB drew on a memorable metaphor from former RBNZ governor Adrian Orr to make a similar case, warning that "we must be wary of jumping at shadows" until hard inflation data confirms whether price pressures are genuinely easing.
Westpac struck a similar tone, noting that "the case for holding the OCR steady is supported by several factors," chiefly a roughly $40-a-barrel fall in oil prices since May.
House prices add to the mixed picture
Underscoring the case for caution, figures cited in Kiwibank's latest note show national house prices slipped 0.2% in June, with Auckland recording a sharp 4.3% monthly decline.
Consumer confidence has also only partially recovered, ticking up to 91.3 in June on the ANZ-Roy Morgan measure, but remaining well below neutral and 14 points lower than January. Business confidence, by contrast, has surged to multi-year highs, creating an unusual divergence Kiwibank describes as one of the widest outside the pandemic period.
What it means for advisers
Whatever happens Wednesday, all three banks agree the OCR is heading higher over the next year, though their forecasts diverge meaningfully beyond that point. ASB expects a peak of 3.25% by early 2027, while Westpac's projections run notably hotter, reaching 4% by late 2027.
For advisers, that spread matters: clients weighing fixed-term lengths face materially different rate paths depending on which forecast proves closer to the mark. With borrowing capacity and refixing decisions in focus for property investors and first-home buyers alike, the coming weeks of data — particularly the 21 July CPI release — will do more to settle the debate than Wednesday's decision itself.
For more information and insights, read the Westpac, NZIER, Kiwibank, and ASB reports.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
