ANZ Economists Now See 3 OCR Increases in the Second Half of the Year

ANZ's economists are expecting the Reserve Bank (RBNZ) to increase the Official Cash Rate (OCR) three times in the second half of this year.

In a research note they say they now expect the RBNZ to increase the OCR by 0.25% in July, September and October this year, which would take it to 3.0%, from the current 2.25%. Previously they hadn't expected the RBNZ to increase the OCR until December.

"Essentially, we see the RBNZ becoming too uncomfortable with an OCR is stimulatory territory as inflation inevitably rises, concluding the risks of going too late outweigh the risks of hiking too soon, as long as the OCR is not considered contractionary," the report says.

However, ANZ's economists also say by raising the OCR three times starting in July, the RBNZ will able to hold it at 3.0% for longer, rather than move up to 3.5% as ANZ had previously forecast.

"Even with the OCR still low, we think such hikes [3 x 0.25%] would be very potent, and therefore we are no longer forecasting the OCR will need to increase to 3.5%, we are flatlining it at 3.0%," the report says.

The report also acknowledges the current uncertainties facing both the RBNZ, and ANZ's own forecasts.

"It is not a given that hiking the OCR this year will prove to have been the right thing to do in the fullness of time," it says.

"However, the RBNZ [Monetary Policy] Committee will not want to repeat the mistake of the COVID era, when policy was kept too loose for too long," it says.

And the report contains a significant disclaimer about its own forecasts.

"We can't stress enough the uncertainty of the outlook," it says.

"A July kick off for hikes is not a high-conviction view - it is just what we currently see as the single likeliest timing as we stare into the murk.

"Take everyone's forecast with a grain of salt, including both ours and the Reserve Bank's," it warns.

"That's just the world we find ourselves in," it says.

Statistics NZ's December quarter Consumers Price Index (CPI) showed 3.1% annual inflation, just above the Reserve Bank's 1% to 3% target range. March quarter CPI is out on April 21.

• ASB has also updated its OCR forecast. In it's latest Economic Weekly report, ASB's economists say they now expect the RBNZ to start raising the OCR from September, after previously forecasting it to start rising in December, and are expecting the OCR to hit 3.25% by mid-2027.