Interest rates likely to rise

Wednesday 8 September 2004

Economists are unusually unanimous: they expect the Reserve Bank to raise its official cash rate (OCR) from 6% to 6.25%, the fifth rate hike this year, when it releases its latest monetary policy statement.

By The Landlord

A Reuters poll of 14 economists found all 14 are expecting a rate rise on Thursday and that nine of them expect another rise to take the OCR to 6.5% before the end of this year. The OCR, which the pricing of floating mortgage rates, started the year at 5%.

ANZ Bank’s economists say they expect central bank governor Alan Bollard’s tone will be hawkish.

"Partial indicators suggest the economy continued apace following the stellar GDP result recorded in the March quarter," ANZ says. But there are signs the housing market, a key source of inflationary pressures, is starting to slow.

ANZ says the wholesale interest rates market has fully priced in a 25 basis points rate rise on Thursday and rates the chances of a further rise in October at 60%.

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