Fifteen economists surveyed by mortgagerates.co.nz said they expected the OCR to remain at 2.5%. But two thought it likely that there would be a lift by the end of the year.
Robin Clements, of UBS New Zealand, and Paul Bloxham, of HSBC, expect a 25 basis point lift in December.
Almost all the others expect the OCR to reach 2.75% in March 2014.
Clements said house price inflation and signs in the latest Quarterly Survey of Business Opinion of ongoing, strengthening economic growth above what had been predicted would mean Reserve Bank governor Graeme Wheeler would need to raise the rate before long.
He said macroprudential tools would likely not do enough to make a difference to the housing market. An announcement on loan-to-value restrictions is expected as early as next month.
Westpac chief economist Dominick Stephens agreed. He said if LVR restrictions slowed the market, that could push back OCR hikes. But with no precedent to draw from, it could make no decisions before it knew what the outcome would be. “The Reserve Bank still has to wait to see what effect LVR restrictions will have.”
Westpac is expecting a move next March, noting inflation is still subdued.
New Zealand’s dollar has been tracking slightly lower than expected, which provides the Reserve Bank with a bit more space to raise the rate. But Stephens said that was counteracted to some extent by across-the-board interest rate rises from the banks.
Infometrics’ Gareth Kiernan agreed it was not enough to convince the bank to move yet. “At the moment, we’ve still got spare capacity in the economy. The Bank doesn’t want to raise interest rates too early, as they did in 2010, when they had to then cut again.”
He said Wheeler would want to raise the OCR before inflation began to accelerate seriously but would be looking for a broader economic lift first. He is expecting the rate to increase to 2.75% next March.
“But having said that, talking to clients last week, there’s a strengthening in building cost inflation coming up over the next couple of quarters. The Reserve Bank will be concerned about that but there are special factors driving that. It will be looking at the broader economic and inflation positions.”
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