90% of economists expect RBNZ hike on September 2, poll shows
With 27 of 31 economists expecting a September hike, the move itself carries little surprise value, keeping focus on the pace and scale of further tightening. The wide dispersion in end-2027 forecasts, ranging from 2.50% to 4.00%, points to genuine uncertainty over how far this cycle ultimately runs, with Westpac and BNZ at the hawkish end anticipating 4.00% against ANZ’s more moderate 3.00% call. A softer than expected housing market, with prices seen broadly flat this year, may offer some counterweight to inflation concerns, but signs of economic recovery, including expected growth resuming this quarter, give the RBNZ room to continue tightening without an immediate growth constraint.
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Economists overwhelmingly expect the RBNZ to keep hiking through year end, but views diverge sharply on where the tightening cycle ultimately stops.
Summary:
- 27 of 31 economists polled by Reuters expect the RBNZ to raise the OCR by 25 basis points to 2.75% on September 2, its second consecutive hike.
- Two-thirds of forecasters, 20 of 30, expect at least one further hike next quarter, with a median year-end forecast of 3%.
- Inflation rose to a 2.5 year high of 4.1% last quarter, and economists do not expect it to return to the 1%-3% target range this year, partly due to energy price pressure.
- New Zealand’s neutral rate is generally estimated at 3.00%-3.25%; one analyst cited discomfort at being this far below neutral as the main rationale for hiking.
- Forecasts for end-2027 range widely from 2.50% to 4.00%, with a median of 3.00%; Westpac and BNZ see 4.00%, Kiwibank and ASB see 3.25%, and ANZ sees 3.00%.
- The economy is showing signs of recovery, having likely contracted 0.1% last quarter before an expected 0.4% growth this quarter, giving the RBNZ room to keep tightening.
- Home prices are seen broadly flat this year before rising 3% in 2027, according to a separate Reuters poll of property analysts.
The Reserve Bank of New Zealand is expected to raise interest rates for a second consecutive meeting on Wednesday, according to a strong majority of economists surveyed in a Reuters poll, with further tightening expected next quarter as inflation pressures persist. About 90% of economists, 27 of 31, surveyed between August 20 and 27 expect the RBNZ to raise the official cash rate by 25 basis points to 2.75% at its September 2 meeting.
Last month’s meeting saw the central bank raise rates for the first time in more than three years, alongside a signal of further tightening ahead aimed at returning inflation to its 1%-3% target range. Since then, official data has shown inflation rising to a two and a half year high of 4.1% in the most recent quarter, and economists do not expect it to return to target this year, citing in part upward pressure on energy prices.
One analyst cited in the poll said the main rationale for continued hiking is straightforward: inflation remains above target, and the RBNZ is uncomfortable being as far below neutral as it currently sits. New Zealand’s neutral interest rate, the level that neither stimulates nor restrains growth, is generally estimated at around 3.00% to 3.25%.
Two-thirds of economists polled, 20 of 30, expect the RBNZ to raise rates again by at least 25 basis points next quarter, with a median year-end forecast of 3.00%. Higher rates are expected to weigh on the housing market, with a separate Reuters poll of property analysts pointing to broadly flat home prices this year, well behind inflation, before a 3% rise in 2027.
The broader economy is showing tentative signs of recovery. Having likely contracted 0.1% in the previous quarter, growth of 0.4% is forecast for the current quarter, according to a separate Reuters poll, potentially giving the central bank additional room to continue raising rates without immediately weighing on activity.
Among economists who provided rate forecasts through the end of next year, there was no clear consensus, with projections ranging from 2.50% to 4.00% and a median end-2027 forecast of 3.00%. Some major New Zealand banks held notably more hawkish views than the broader panel, with Westpac and BNZ both predicting the cash rate would reach 4.00% by the end of 2027, while Kiwibank and ASB projected 3.25% and ANZ expected 3.00%. One analyst summarised the uncertainty by noting that the eventual peak, which they put at around 3.25% in their own view, would likely hinge on whether spare capacity in the economy or ongoing cost increases dominate the medium-term inflation outlook.
Reserve Bank of New Zealand Governor Breman
This article was written by Eamonn Sheridan at investinglive.com.