Mortgage pain: NZ’s biggest bank changes call, picks more rate hikes

ANZ economists have revised their outlook for the Official Cash Rate to reflect ongoing inflation risk as the Iran conflict drags on, pushing fuel prices up.

“We are adding in hikes in February and March in addition to October, which would take the OCR to a peak of 3.50%,” ANZ chief economist Sharon Zollner said today.

Zollner said there were three underlying reasons for expecting the Reserve Bank (RBNZ) to hike more aggressively – including signs of recovery in the domestic economy.

“First, the crude oil price has lifted sharply: the spot Dubai price is now more than 40% above the RBNZ assumption [for the fourth quarter],” she said.

Second, the NZ dollar had dropped out of favour as global risk aversion has increased.

“This will raise the price of not only fuel but all imports,” Zollner said.

The third reason was that “the New Zealand economy currently has a bit more momentum than expected”.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.