OCR Preview Survey: all eyes on inflation comments

Leading economists predict the official cash rate will stay on hold this week, with all eyes on the Reserve Bank's views on inflation and future rate hikes.

Sharon Zollner

TMM's preview survey, conducted ahead of this week's Monetary Policy Statement and OCR decision, reveals a unanimous view that the central bank rate will be kept at 0.25%.

Economists are on the lookout for any mention of future interest rate hikes driven by inflationary pressure.

The central bank is predicted to revise up its forecasts for GDP, employment, and inflation, factors likely to increase the odds of rising rates in the next year. 

ANZ's Sharon Zollner said the RBNZ would acknowledge stronger data, but believes "tightening is far off".

The bank predicts the first rate hike in August next year, with steady increases up to 1.25% by the end of 2023. 

Donal Curtin of Economics NZ said the central bank would need to consider how much of the current inflationary pressures were temporary, and whether inflation would continue to rise in the long term. 

BNZ's economics team, and independent commentator Tony Alexander, expect a less dovish commentary on the economy, amid recent economic data. 

Kiwibank's Jarrod Kerr agrees, and expects "a de-emphasis on the willingness to cut the OCR further, and perhaps some more-focused discussion on the criteria that would guide the bank in any decision to increase".

Kerr does not believe an increase this year is "plausible".

He said: "Although the OCR will be left unchanged, there’s much the RBNZ must update. The economic outlook has clearly improved, despite some turbulence over the summer months."

Kerr added: "Downside risks have receded, and upside risks are rising. We expect inflation to spike to 2.5% next quarter, and rising costs are a particular pain point for many Kiwi firms. We expect to see a more detailed discussion around the cost-push inflationary wave, and whether or not the RBNZ deems the surge to be transitory."

The Reserve Bank will make its OCR decision, and publish its Monetary Policy Statement, on Wednesday afternoon. 

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