New announcement. Learn more


New Inflation numbers - what do they mean?

New inflation data came out yesterday,  and it was lower than expected. Many had planned and anticipated 7.5% inflation, however it came out at 7.2%. What does this mean? Are we about to see the peak in mortgage rates?

The Reserve Bank of New Zealand (RBNZ) may be faced with the possibility of having to lower its forecasted peak of wholesale interest rates due to recent inflation figures. The latest Consumer Price Index shows that inflation may be slowing down, which suggests that the interest rate hikes that have already taken place are starting to have an impact.

The RBNZ had previously forecasted that inflation would rise to 7.5% and had indicated that there would be another 75 base point rise to the Official Cash Rate (OCR) in the next review on February 22nd. They also forecasted that the OCR would peak at 5.5% in the middle of 2023. However, based on the actual inflation outcome, it is now expected that wholesale interest rate markets will start 'pricing in' a lower 50 basis point rise to the OCR next month. This means that retail interest rates, such as mortgage and deposit rates, may also be approaching their peaks.

Some economists have come out in favour of the RBNZ hiking the OCR by only 50 points in February and not raising it as far as they previously forecasted. ANZ, Kiwibank, Westpac, ASB and BNZ economists have all changed their predictions for the OCR, with some expecting a peak of 5.25% instead of 5.50%. However, ANZ economist Finn Robinson and senior economist Sharon Zollner believe that the RBNZ will be hesitant to lower the OCR as it could cause fixed mortgage rates to fall significantly.

What does this mean for you and your mortgage? If Interest rates are peaking soon, we may start to see a reduction by the end of the year. If you are looking for a new mortgage or refix give me a call, always happy to offer advice.