RBNZ to Raise OCR by More Than Expected Amid Ongoing Price Hikes

Westpac NZ senior economist Satish Ranchhod believes the Reserve Bank of New Zealand (RBNZ) will need to raise the Official Cash Rate (OCR) by more than they assumed in their September meeting.

Ranchhod expects 'ongoing sizable increases' in administered prices, including local government rates. These prices are already high and have limited room for further inflation surprises, making it difficult for the RBNZ to absorb any additional price hikes.

The economist points out that even before the recent spike in oil prices, the RBNZ had 'little headroom to absorb upside inflation surprises.' Administered prices include electricity costs, insurance premiums, and local government rates. With these costs increasing further, Ranchhod warns of higher interest rates on the horizon.