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Saturday, June 22, 2024

OCR increase expected is “way of minimal resistance,” claims ANZ chief economist

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According to ANZ senior economist Sharon Zollner, another significant rate hike is anticipated today. This would be the smoothest course of action.

The official cash rate is anticipated by the market to increase by 50 basis points, or half a percent, to 4.75 percent.

Although there was some disagreement, all experts and market pricing were in agreement, according to ANZ Chief Economist Sharon Zollner in an interview with Morning Report.

She remarked, “I’d say it is the road of least resistance right now.

“After that, we’re picking another couple of 25 point increases.”

The exact height it would reach was still very much in question, according to Zollner.

She emphasised that this occurred despite the cyclone, not as a result of it.

“At the end of the day, all monetary policy can do is increase or decrease demand in the economy, and it’s not clear how increasing demand and potentially igniting the property market will aid in disaster recovery when New Zealand is obviously in need of allocating resources to the afflicted areas

She claimed that the Reserve Bank was curious about whether the economy had excess capacity or if things were running too hot.

Because of the disruption to retail sales, logging, agricultural production, and other industries, it’s possible that a recession is currently underway.

“Does this imply that there will be disinflationary pressure, though? Unfortunately, not at all.”

She predicted that it would likely be an inflationary shock.

The Central Bank will be hoping they can see through that and avoid having to hike rates further, but given where they are starting from, there is a chance they won’t be able to.

The most crucial factor affecting the monetary situation was not the interest rate decision made that day, but rather, “how they manage expectations for where interest rates are going to go in the future.”

According to her, this would decide the fixed mortgage rates.

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