The latest CPI data, which showed much stronger inflation than expected, had prompted some to question whether the Reserve Bank might move sooner rather than later on the rate.
But economists said Governor Graeme Wheeler was likely to want to wait until March to increase the OCR – if only for the pragmatic reason that he would get a chance to explain his reasoning in more detail at the MPS.
Only ANZ is expecting an increase in January. Chief economist Cameron Bagrie said he expected the rate to be moved up, followed by two more moves at the next two announcements.
Most of the other 16 economists surveyed by mortgagerates.co.nz expected the first increase in the OCR to be a March move of 25 basis points. But Bancorp and NZIER expected a 50 basis point increase.
UBS said it expected a March increase of 25 basis points but said there was clearly a risk of a January increase. FNZC put the chance of an increase next week at 35%.
ASB said the chance of a move in January was one in four. It still expected a March move of 25 basis points, but said the Reserve Bank could justify moving this month or waiting. The bank’s economists said the CPI data in particular had made the OCR review a close call.
Gareth Kiernan, of Infometrics, said both GDP and CPI data were putting pressure on, but the bank would want more time to see how loan-to-value restrictions panned out. Initial indications that residential property turnover was dropping would not be enough, he said. “They’re not worried about house sales but the flow on effect on house prices, and there’s no sign yet of that turning.”
JP Morgan agreed clarity was needed about the LVR restrictions, from the public's point of view as well as the Reserve Bank's. “Will they be unwound soon if rates are going to rise quickly?"
TD Securities’ economists said Wheeler would use next week’s announcement to warn that tighter interest rates were coming. “While we have been strong advocates of higher cash rates in New Zealand for some time, and the odds of such a move next week are far from zero, we remain of the view that next week’s OCR review is more likely to prepare markets for the forthcoming tightening cycle, not pull the actual trigger. Remember that these OCR reviews are limited to four to five paragraphs at most.”
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