The Reserve Bank of New Zealand starts to reveal its hand a bit more as the horizon starts to clear. As we head towards the light after the COVID tunnel we are graced with OCR projections.
The RBNZ can see some rate increases on the OCR around mid to late 2022. This has always been a guessing game for the RBNZ and they are quite clear that many variables can change this outlook.
What Variables?
Well lets think about some of the main goals
- Mid point of 2% inflation
- Maximum sustainable employment
- Consider impact on house prices
Ok so inflation and employment comes down to how well covid is contained. House prices actually can be controlled by other tools apart from the interest rate(OCR). Such as the macro prudential tools which include the deposit requirement for investors and limits on the low deposit borrowing.
Other factors which put less pressure on the interest rates, yet to play out are government policies. Such as tax changes taking the pressure of demand. Immigration settings which can impact demand, nett inflow is was down right now.
Government policies which can put pressure on inflation includes infrastructure spending and loos fiscal policies.
