Westpac now alone in predicting OCR rise

This after ANZ revises forecast

Westpac now alone in predicting OCR rise

With ANZ’s recent revision of its rate forecast, Westpac is now the only bank left forecasting a rate hike, as concerns about inflation persist.

ANZ revises forecast

ANZ recently altered its forecast, no longer anticipating the Reserve Bank to resume hiking early next year, although it acknowledged that increases were still a “significant risk.” The bank now expects the OCR to remain at 5.5% until a potential cut in February 2025.

Despite mixed recent data, ANZ said overall trends have favoured the RBNZ, especially in the labour market, which appears to be rebounding faster than anticipated by both ANZ and the central bank, Stuff reported.

“We seriously considered pushing the hike out, rather than dropping it, as we still see the inflation-fighting job taking longer than the Reserve Bank expects, and we still see a solid chance that a 5.5% OCR will not prove sufficient,” ANZ said.

“However, we no longer see that chance as being over 50%, which means a higher OCR belongs in the risk basket rather than our central forecast. Cuts remain a distant prospect, in our view; indeed, we’ve pushed out our estimate of when they will occur by one quarter.”

ANZ said the RBNZ would have difficulty in communicating its forecasts to a market “itching to price cuts more aggressively.”

Westpac’s forecast out this week

Kelly Eckhold, Westpac chief economist, said the bank’s OCR forecast is scheduled for release this week, but did not say whether it might revise its prediction for another increase.

“I can’t really talk about what I might do in the future,” Eckhold said. “We have to think about what the outlook is going to be – obviously last week’s inflation data, for example, was a bit lower than we expected, we made an adjustment to our CPI forecast because of that.”

The Westpac economist said, however, that there are still reasons a rate hike may be necessary, as he suggested that some of the unexpected decreases in inflation recently could be a result of “borrowing” from the disinflation that was expected.

Recent rental data from Stats NZ has also shown considerable strength, while ongoing migration continues to exert pressure, Stuff reported.

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