Pressure on Reserve Bank to increase rates again
Sunday 17 October 2004
Higher construction costs, petrol prices and council rates kept inflation bubbling along in the September quarter, keeping the pressure on the Reserve Bank to increase interest rates for a sixth time later this month.
By The LandlordStatistics New Zealand figures show the consumer price index rose 0.6 per cent in the September quarter from the June quarter and was up 2.5 per cent from a year ago.
Economists said the result met expectations and ensures Reserve Bank governor Allan Bollard will have no choice but to increase the official cash rate by 25 basis points to 6.5 per cent on October 28.
Another rate rise in December was also on the cards as inflation threatened to nudge through the top end of the central bank's target zone of 1 to 3 per cent early next year, they said.
A seventh rate hike in less than 12 months would push floating mortgage rates close to 9 per cent and suck further heat out of the housing market, which is already showing signs of slowing.
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Auckland’s housing market saw another slump in sales volumes in May but prices are holding steady, according to the city’s largest real estate agency.
Periods of house price decline are rare and "short-lived", says economist Tony Alexander, amid forecasts of a drop of 10%-15% this year.
The Reserve Bank says the commercial property sector is vulnerable to the Covid-19 crisis. But PMG Funds' chief executive believes that while there’ll be short-term pain, the biggest long-term impact will be structural change.