If the RBNZ lifts the OCR to 4.45% – Jacinda is GONE as PM in 2023

Whilst Jacinda Ardern is not the Reserve Bank Governor – lifting the OCR will be the ‘nail in the coffin’ for her political career in our humble opinion. The POLLS already have her and the Labour/Greens way down in support – this announcement will set them further back. Why?

“There is massive inflation and an OCR lift will take more money away from hard working kiwis via massive increases in their mortgage payments. So everything is going up in price and now Kiwis with a mortgage have less to pay for those things.  This is a very scary predicament for a Labour Party who is toast in the POLLS already with National/Labour coalitions neck and neck. Talk to your neighbours and freinds and it is hard to find anyone that isn’t a government servant that wants another term of Jacinda”

Property Noise Group

Most economists are forecasting the RBNZ to raise the cash rate by 75 basis points to 4.25%, in its final monetary policy statement of the year.

It would be the biggest lift in the OCR since it was introduced as a monetary policy tool in 1999.

ASB chief economist Nick Tuffley said the rate was expected to go even higher early next year, to levels not seen since the global financial crisis 14 years ago.

“Our expectation at the moment is the cash rate will peak at 5.25% [in the first half of next year].

“We don’t think the Reserve Bank has done the job yet but when we’re getting into the first few months of next year, that’s when the Reserve Bank is going to be thinking hard about – OK, have we done enough now?”

Annual inflation remained stubbornly high at 7.2% for the three months ended September, well above the RBNZ’s forecast of 6.4%.

Tuffley said a smaller 50 basis point hike on Wednesday could not be ruled out either.

“It would be a mild surprise, only mild in the sense that the Reserve Bank has been doing 50 basis point moves for about five times in a row now.

“The question mark for the Reserve Bank is with all these signs of things heating up a bit recently and now having a three month gap until its next decision, would it prefer to just front-run things with that 75 basis point increase.”

Risk of inflationary spiral

The Reserve Bank was early in its move to hike interest rates, but Westpac acting chief economist Michael Gordon, said the central bank faced a “real risk of an inflationary spiral”.

“Given the momentum in domestic demand, and the cautious initial pace of rate hikes, the economy has become increasingly overheated and the advantage appears to have been lost. Now a much higher level of interest rates will be needed to bring inflation under control,” he said.

Westpac is forecasting the OCR to peak at 5% by early next year.

“Since the last OCR review in October, the economic data has been a stream of uncomfortable news on the inflation front. The September quarter consumers price index showed that price rises are becoming more widespread, and are increasingly being driven by local forces,” Gordon said.

Gordon also believed a 50 basis point hike was a possibility this week, but he said a 100 basis point hike could also be on the cards due to the three month gap until its next review.

“Indeed, even a 75 basis point rise [this] week would be a slowdown from the RBNZ’s recent pace – they have effectively been delivering 100 basis points every three months. It’s not ideal that scheduling should play such a role, but nevertheless it is a factor.”