ANZ NZ Economists Predict Three More OCR Hikes

ANZ NZ economists now expect the Reserve Bank to increase the Official Cash Rate (OCR) three times, instead of just once, taking it to 3.50%. This comes after a sharp increase in crude oil prices, which has led to a significant rise in fuel costs. The spot Dubai crude oil price is now over 40% above the RBNZ's assumption for the fourth quarter, at US$83.7 per barrel.

The ANZ NZ economists say this will lead to higher inflation and more upward pressure on wages. They also note that the trade-weighted index has fallen 3.3% below the RBNZ's fourth-quarter assumption, which will raise the price of imports and provide a boost for exporter incomes.

In addition, the ANZ NZ economists point out that the recent GDP growth has been stronger than expected, with annual GDP growth in Q2 at 2.6%. This suggests that the negative activity impacts of the oil shock have so far been less disinflationary than previously assumed.