RBNZ tipped to raise rates on Thursday

Sunday 25 July 2004

Once again, economists are unanimous in their expectation that the Reserve Bank will hike interest rates for a fourth time this year when it reviews the Official Cash Rate (OCR) on Thursday.

By The Landlord

The OCR, which directly influences bank’s floating mortgage rates, is currently at 5.75% and the RBNZ is expected to raise it to 6%.

"Everybody’s picking a rate hike and the market is fully pricing in a hike," Deutsche Bank senior economist Darren Gibbs says.

In the wholesale market on Friday, the 90-day bank bills were trading at 6.28%. The rule of thumb is that floating mortgage rates are usually about two percentage points higher.

Since the Reserve Bank released its previous monetary policy statement "all the data that matters has been stronger than expected," Gibbs says. That was particularly true of the growth figures which showed the economy grew 2.3% in the March quarter, bringing annual growth to 5%. Economists had expected the quarter’s growth had been about 1.5%.

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