Three rate rises now tipped from September as Middle East tensions cool
ASB has pushed back its forecast for when the Reserve Bank will resume lifting the official cash rate, as easing Middle East tensions take pressure off the inflation outlook.
Oil price relief buys the RBNZ time
Chief economist Nick Tuffley (pictured) said extremely high oil prices "now look to be behind us," following a June Memorandum of Understanding between Iran and the US that has helped calm global energy markets.
ASB now expects the RBNZ to hold the OCR steady until September, a shift from the split vote seen among RBNZ committee members back in May over whether to hold or lift rates.
The bank still expects the OCR to eventually rise, forecasting three 25-basis-point hikes at the September, October, and November meetings this year, followed by one final increase in early 2027 that would take the OCR to a peak of 3.25%.
Other banks take a less settled view: ahead of the 8 July OCR decision, three of the five major banks — Westpac, ASB, and Kiwibank — expect a hold, while ANZ and BNZ are pushing for an immediate increase, with BNZ forecasting the OCR eventually reaching 4% in 2027 and Westpac pointing to a peak near 4%, both well above ASB's 3.25% call.
Tuffley noted the improved outlook "gives the RBNZ more scope to wait and gauge the strength of the economic recovery and underlying inflation pressures," even as he cautioned that "it would only take one 'Orange Swan' event to unravel this ceasefire."
Inflation outlook improves, but housing stays subdued
ASB expects annual CPI inflation to peak at 4.1% in the June 2026 year before easing to around 3.5% by year-end, with a temporary dip below 2% possible from mid-2027 as this year's oil-driven spike drops out of annual comparisons. Fuel price relief is doing much of the work here, with tradable inflation expected to fall from around 5% currently to close to zero within a year.
The housing market outlook remains subdued regardless. ASB expects broadly flat house prices through 2026, citing ample stock, buyers "taking their time to pick," and lingering uncertainty from the oil shock weighing on confidence. The bank does not expect a material turnaround before 2027.
Rates already moving at the retail level
That shift is already showing up in what banks are charging: ASB cut its five-year fixed rate by 30 basis points to 5.59% on 1 July while lifting shorter terms, a move that mirrored similar cuts from Westpac and ANZ in the lead-up to the OCR decision.
For mortgage advisers, that gives borrowers on floating rates or approaching a refix a clearer window to act before the tightening cycle begins in September.
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