A positive development might be on the horizon for New Zealanders burdened with mortgages, as an economist suggests that interest rates could soon experience a decrease.
In September, the Reserve Bank of New Zealand (RBNZ) maintained interest rates at 5.5 percent for the second consecutive month. This decision followed a series of increases totaling 525 basis points since the end of 2021, aimed at curbing the surge in inflation.
However, recent data from Stats NZ indicates a gradual easing of inflation in New Zealand, with the latest figures revealing the lowest inflation levels since December 2021 at 5.6 percent.
While just under a month ago, Infometrics Principal Economist Brad Olsen expressed skepticism about an imminent reduction in interest rates due to persistent inflationary pressures, Milford Asset Management portfolio manager Mark Riggall now perceives a notable shift.
Riggall, speaking on Thursday morning, highlighted a substantial change in market expectations regarding interest rates over the next few months to two years. He attributed this shift to various factors, such as decreasing inflation in the United States and declining food prices in New Zealand.
Despite acknowledging that there is still “some ways to go” as year-on-year data remains higher than banks prefer, Riggall emphasized that the controlled inflation is instilling confidence among investors.
As a result, attention has turned to the timing of a potential interest rate cut. Riggall explained that if the central bank is no longer raising interest rates, the logical next step could be a reduction. He pointed out that historically, the period between the last interest rate hike and the first cut tends to be relatively short, averaging about 4 to 5 months in the United States over the past 50 to 60 years.
With the last hike occurring in July, investors are now contemplating the possibility of interest rate cuts starting in the coming year.