Major banks say OCR pause is finely balanced, with upside risks to mortgage rates if inflation pressures persist
New Zealand’s major banks have broadly welcomed the Reserve Bank’s decision to leave the official cash rate (OCR) on hold at 2.25%, but their post‑meeting commentary carries a clear signal for mortgage brokers and their clients: the risks for mortgage rates remain skewed towards further increases rather than cuts.
Economists at Westpac, ASB, Kiwibank, and ANZ all stress that RBNZ is walking a tightrope between a fuel‑driven jump in inflation and a still‑fragile growth outlook.
The central bank is now forecasting annual CPI to reach about 4.2% in the June quarter on the back of higher oil prices, while reiterating that it will focus on medium‑term inflation rather than the near‑term spike.
In its policy statement, RBNZ emphasised that “returning inflation to the 2% target midpoint over the medium term” requires core inflation and wage growth to stay contained and expectations to remain anchored, warning that “if these conditions are not met, decisive and timely increases in the OCR would be required.”
Banks see finely balanced, data‑dependent outlook
Westpac chief economist Kelly Eckhold describes the decision as a cautious but appropriate response to the Middle East shock, noting the committee is deliberately buying time to see whether the rise in fuel costs feeds into broader price‑setting behaviour.
ASB senior economist Mark Smith points out that RBNZ will be watching survey‑based measures of inflation expectations and wage growth closely in coming months, suggesting those indicators will be critical for the timing of any move.
Kiwibank chief economist Jarrod Kerr characterises the outcome as a “predictable and welcome hold with full consensus on the OCR”, arguing that it makes sense not to “pick a move too early” when both global energy markets and domestic activity are in flux.
Kerr’s team highlights that households are already being squeezed by higher pump prices and that confidence readings have softened again, factors that could limit how far the RBNZ ultimately needs to tighten.
ANZ chief economist Sharon Zollner, however, sees the tone of the review as leaning slightly hawkish. Zollner notes that discussion of “pre‑emptive” tightening and the strong language around “decisive and timely increases in the OCR” if inflation expectations lift suggest the bank is prepared to act sooner than markets had been assuming if the data turn.
Advisers brace clients as OCR risks tilt to higher mortgage rates
Overall, bank commentary generally suggests the next move in the OCR is still more likely to be up than down, even if the exact timing is uncertain. For first-home buyers and property investors, that means current mortgage rates may not fall much further – and could rise again if inflation expectations drift higher.
Advisers may choose to model clients’ borrowing capacity under a range of rate scenarios and keep a close eye on upcoming data on inflation, wages, and household confidence ahead of the RBNZ’s next full Monetary Policy Statement.
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