The comments are from an article published on the RBNZ website.
- Wheeler says interest rate may increase by 2 percentage points from 2014 to early 2016
- Bigger rate rises would be needed if mortgage lending limits don’t slow house price inflation
- “Keen to see house price inflation moderate significantly”
- Interest rates likely to rise in next 2 years to restrain inflation pressures
There’s some chatter that he’s said something similar before and that’s possible but I don’t remember it. (update: I can’t a comment anything like this previously)
The key quote:
Over the next two years interest rates are likely to rise in order to restrain an expected increase in broader inflation pressures. We currently expect that the official cash rate could increase by 2 percent from 2014 to the beginning of 2016.
That compares to the OCR statement:
OCR increases will likely be required next year. The extent and timing of the rise in policy rates will depend largely on the degree to which the momentum in the housing market and construction sector spills over into broader demand and inflation pressures. We expect to keep the OCR unchanged in 2013
The OCR is at 2.50% with the OIS market priced at at 3.30% in two years time. On the face of it, this is a massively bullish comment.
The house price rally isn’t going to stop and foreign money will continue to flood the tiny New Zealand housing market so you can bet Wheeler’s promise will be put to the test.
