Economists and pundits predicting the Reserve Bank would increase the Official Cash Rate (OCR) by 50 basis points prior to the recent community outbreak of Covid-19 were likely "trying to grab attention," Kiwibank CEO Steve Jurkovich suggests.
Speaking to interest.co.nz after Kiwibank posted a 121% rise in annual profit to $126 million on Thursday, Jurkovich said he never supported the view that the Reserve Bank would hike the OCR aggressively on August 18, the day after the Covid-19 outbreak was discovered on Auckland's North Shore. Ultimately the Reserve Bank left the OCR at its record low of 0.25% citing uncertainty due to the Covid-19 outbreak.
"I personally never supported that we were going to get 50 [basis points]. It didn't make any sense to me about why you would go so hard. I think it's really in the balance and it just shows how fragile things are, which is things can change really, really quickly," Jurkovich says.
"My view over Covid [is] it has been quite fashionable to put out big headlines around a 50 point raise and a 20% drop in property values and things like that. I think it's part and parcel of trying to grab attention. But I think we're going to see a pretty moderate approach from the Reserve Bank and others, which is they know some businesses are doing it hard, households will be worried, [so] let's just keep the settings pretty stable."
ASB economists had suggested the Reserve Bank could look at a 50 basis points rise, while ANZ and Westpac economists raised the possibility of a 50 basis points hike. ASB and Westpac's economists changed their mind after the community Covid-19 case emerged, predicting no change.
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