DownToEarth Kiwi is a Better OCR Predictor than the Chief Economists at all this country's Big Banks
I reported last December on this blog that:
"In a bunch of radio interviews these past weeks, I've argued that the RBNZ should not have over reacted to inflation (having under reacted in 2021) by hiking the Official Cash Rate by 75 basis points in order to 'engineer a recession'". When asked on Radio NZ what would be the best policy, my view was a 25 basis point rise, 50 at most. The reason is that inflationary pressures from oil & supply chain problems have been easing, so there is no need to throw the Kiwi economy into a recession and cause untold pain to those with large mortgages when that situation could've been avoided".
These past months most market commentators differed sharply from my view - and were picking another 75 basis point rise in the OCR when the Monetary Policy Committee next meets in February. However yesterday the US Federal Reserve increased the Fed Funds Rate by 25 basis points because, “Inflation has eased somewhat but remains elevated”.
Now the Kiwi Big Bank economics and market commentators are rapidly back-pedaling and reversing themselves and coming around to my view. Westpac's "Weekly Market Review" released yesterday says, "We have revised down our forecast for the Official Cash Rate and now expect a 50bp rise at the RBNZ’s February policy meeting (previously we expected a 75bp rise) .. the acceleration in inflation that the RBNZ has been forecasting has not eventuated".