‘Enjoy the low rates . . . while they last’

Enjoy the mortgage war while it lasts. Global finance giants Goldman Sachs and Nomura aren’t buying in to the business gloom and both say rates will rise sooner than most local forecasts.

Goldman Sachs says “the strength in New Zealand’s hard data means the chance of a 2019 rate hike are increasing,” Bloomberg News has reported.

A Sydney-based strategist with Japanese bank Nomura is picking the kiwi dollar — which rose sharply this week after strong employment data — will rise further in coming months.

Nomura’s Andrew Ticehurst wrote in a research note: “We continue to think the next move in the official cash rate is up and maintain our forecast for a 25 basispoint hike in the fourth quarter of 2019.”

Both calls are more upbeat than the Reserve Bank itself which yesterday delivered its latest Monetary Policy Statement. It said it expects the official cash rate to stay on hold at 1.75 per cent into 2020. The rate has already been on hold for two years.

That stability has created a window for a local bank minimortgage war — dropping their rates even as the global cost of borrowing rises. Interest rates and the value of the dollar are intimately connected as global traders favour countries with higher rates.

After years of low inflation the Reserve Bank has taken a cautious approach. Local economists say the lack of inflation has taken pressure off the bank to lift rates in a hurry despite continued strength in the economy.

Weak business confidence has been the most negative economic signal this year but has thus far not translated into slower growth or higher unemployment.