OCR Hikes and Oil Price Volatility Hit NZ Households Hard

ASB's latest quarterly economic forecast predicts that New Zealand households will not feel significant improvements until next year. The Reserve Bank is expected to raise the official cash rate (OCR) twice more before Christmas to combat inflation, which has been driven by fuel prices.

According to ASB chief economist Kim Mundy, 'if this year had a personality, it would be fickle.' She notes that oil prices have risen again, and there is no clear path to ending the conflict. This will likely lead to higher inflation expectations, potentially prompting further OCR hikes.

The economy has continued to expand despite offshore shocks, including the largest oil price increase in recent history. However, growth remains narrow, and domestic demand is struggling due to a decline in consumer spending.