According to S&P Global’s forecasts, the National Bank’s Overnight Policy Rate (OPR) is expected to rise by up to 50 basis points amid global inflation caused by the Russia-Ukraine conflict and capital outflows due to the Federal Reserve’s tightening policy.
The National Bank’s Overnight Policy Rate (OPR) is currently 1.75% and a 50 basis point hike would result in an updated Overnight Policy Rate of 2.25%.
In recent months economies around the world have been on the road to raising interest rates, with the US inflation rate reaching another record high in March, or 8.5%, the biggest rise in over 40 year. New Zealand Federal Reserve’s Monetary Policy Committee announced on 13 April that it was raising the official cash rate (OCR) from 1% to 1.5%, the first time since 2000 that the Fed had raised rates by a more aggressive margin of 50 basis points, signalling its growing concern that domestic inflation was spiralling out of control.
If the National Bank announce in May that it will keeping pace with global interest rate hikes, all kinds of domestic lending rates would have followed suit and borrowers would have had to amortize more of their loan amount each month. However, this is good news for time deposit depositors, who will be able to earn higher interest rates on their time deposits.
