RBNZ's Silk Urges Savers to Shop Around Amid Limited Deposit Rate Hikes

RBNZ Assistant Governor Karen Silk emphasized that monetary policy aims to incentivize saving in addition to curbing borrowing demand. In a recent interview, she noted that an Official Cash Rate (OCR) hike should lead to increased deposit rates, not just floating mortgage rates.

Silk pointed out that the OCR increase of 25 basis points from 2.50% to 2.75% did not result in significant deposit rate increases, with some banks raising floating mortgage rates by 25 basis points but only increasing deposit rates by 5-10 basis points.

The RBNZ noted limited pass-through of higher wholesale interest rates to term deposit rates in its Monetary Policy Statement. Silk attributed this partly to the level of liquidity banks already possess and relatively low lending demand, which reduces the need for competing deposits.

She also highlighted 'depositor inertia', where people tend to stick with their current accounts despite lower earning rates compared to term deposits.