The bank believes the OCR could start falling within a year
Kiwibank said fixed-term mortgage rates as well as other fixed interest rates may have already hit their peak.
The Reserve Bank tipped the OCR to climb from the current 3% to 4% next year.
But while other banks have been pricing some further upward movement in the OCR into their lending rates, Kiwibank said it believed the market was “perfectly priced, for now,” Stuff reported.
In a research note on Monday, the New Zealand-owned bank predicted that commodity prices and shipping costs would “continue to decline into 2023” and that slower price increases for imported goods would cool down domestic inflation. The bank said economic growth was also easing.
“If our forecasts are realised, the Reserve Bank may be in the position to start lowering interest rates in the second half of 2023,” it said.
Kiwibank believed the housing market would be “better balanced” in future, with the housing shortage disappearing over the next 12 months and the housing market then entering into an era where demand and supply were more in sync, Stuff reported.
From fears of spiralling inflation, concerns over recession have emerged amongst economists amid a decline in consumer and business confidence over the past few months. There are signs, however, that sentiment is beginning to stabilise, with global share markets now well off their year-lows.
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Kiwibank forecasted a “soft landing” for the economy, but said the risks were “certainly tilted towards a deeper correction.”
Fresh jobs data by Stats NZ, meanwhile, suggested the labour market might be heating up again and showed the difficulties economists are facing as they try to predict where interest rates may turn. Data showed that the number of people in filled jobs increased by 0.5% to 2.31 million in July, after a 0.4% drop in June.
ANZ, which has been more hawkish in its interest rate outlook, said the stronger-than-expected seasonally adjusted jobs numbers were “unwelcome from an inflation-targeting point of view.”
“The labour market is highly inflationary and the Reserve Bank needs to see things cool off significantly to be confident that domestic inflation pressures will drop,” the bank told Stuff.
