Of 18 economist surveyed by this website, all were very confident that the OCR would be left unchanged this week. But five expect some movement before the end of 2013.
Tom Kennedy, of JP Morgan, was the least convinced, putting his prediction at 70% probability.
Annette Beacher, of TD Securities, said she was 95% convinced the rate would stay the same at the next announcement. But she is expecting a 25 basis point lift in September, provided house prices continue to rise. “I suspect they will.”
The Reserve Bank this month released a consultation framework on its proposed macroprudential tools, designed to tackle asset price bubbles and shore up bank stability without dampening the wider economy. Among them are loan-to-value restrictions, a countercyclical capital buffer, a core funding ratio and sectoral capital requirements.
But Beacher said she was not convinced such tools would be a substitute for managing monetary policy and inflation expectations.
Gareth Kiernan, of Infometrics, said it was hard to know whether the Reserve Bank would do anything with the macroprudential tools or not. “We’re leaning towards not and even if they do it will be some time before they come in.”
He said the fact the Bank was still in the consultation paper phase indicated there would be a significant gestation period before any tools were introduced. He did not think house price growth would reach the levels that would force the Bank to take action ahead of any OCR changes.
Among other economists expecting OCR movement this year, Westpac expects a 25 basis point lift in December, Kennedy expects the same lift in the third quarter this year, Kiernan expects the OCR to be 2.75% in December, as does Doug Steel of BNZ. Robin Clements, of UBS New Zealand, expects a 0.25% lift in September.
Kiernan said that by December there should be enough signs that the economy was strengthening to make the Reserve Bank confident in tightening economic policy.
Westpac chief economist Dominick Stephens said it was unlikely there would be any change to the OCR this week. He said he expected Governor Graeme Wheeler’s monetary policy statement to be broadly similar to earlier speeches and to be perceived as hawkish.
“The RBNZ will probably mention that local economic activity has been stronger than anticipated in recent months. This will be countered by observations that inflation has been lower than expected and the trade-weighted exchange rate has risen 4% since December. The recently-declared drought will probably be described as an important downside risk, rather than being included in the RBNZ’s central economic projections at this stage.”
Stephens said house price rises were likely to reach 9% this year nationwide, which would prompt the bank to act with the OCR in December.
