The prediction follows RBNZ’s double hike last week
ASB has predicted another OCR increase by 50 basis points next month after the Reserve Bank hiked it by that amount last week.
Read now: What to do now that RBNZ has lifted cash rate
On Wednesday last week, RBNZ confirmed a 1.5% OCR increase, saying the hike was to “reduce the risks of rising inflation expectations” and provide “more policy flexibility ahead in light of the highly uncertain global economic environment.”
In its Economic Weekly report, ASB said the RBNZ was clearly worried about short-term inflation.
ASB said its “expectations have changed with the news of the 50bp hike” and is “now anticipating a 50bp OCR hike in May, followed by a sequence of 25bp hikes to a 3.25% OCR peak in early 2023.” Newshub reported.
Prior to the RBNZ announcement, ASB forecasted an OCR peak of 2.75% in early 2023.
Read next: ANZ first to lift mortgage rates after OCR hike
ASB said the RBNZ faces a hard balancing act.
“Either they tighten too aggressively and create a ‘sharper than needed slowdown in economic activity’ or they do not act quick enough and face the longer-run costs of entrenched high inflation and inflation expectations,” the Economic Weekly report said. “At some point, when the RBNZ is confident inflation is under control, it will start reducing the OCR. The timing of that is even harder to predict than where the OCR will peak.”
The report added that ASB’s “stab in the dark” was an OCR reduction in mid-2024.
With the OCR currently at 1.5%, the central bank said the New Zealand economy continued to be resilient but Omicron was still disrupting economic activity, Newshub reported.
“There is an elevated level of uncertainty created by the persistent impacts of COVID-19 and clear signals that monetary and broader financial conditions will tighten over the course of 2022,” ASB said in a statement.
The next OCR announcement will be on May 25.
Inflation, meanwhile, is tipped to climb above 7% this week when the latest Consumer Price Index figures are revealed on Thursday, Newshub reported.
