Westpac economists have joined what now appears a surging tide of economists no longer expecting the Reserve Bank to cut official interest rates this year.
Not very long ago at all the broad expectation in the marketplace was that the RBNZ would early this year take the Official Cash Rate down from the current 0.25% levels into minus territory.
But that expectation's slipping away fast in the face of much better than expected economic figures and the steaming hot housing market.
And indeed, Westpac's chief economist Dominick Stephens, in predicting that house price inflation's going to peak at 20% (from a pick of 16% previously), has cited the surging house prices as a significant part of the reason why he's no longer picking two cuts to the OCR this year.
"We expect annual house price inflation will peak at 20% later this year, which is not an environment conducive to further OCR cuts," Stephens says in an OCR forecast update.
Other economists to move away recently from expecting a negative OCR have included those at ANZ, who now see just one further OCR cut to 0.1% in May. And global independent economic researchers Capital Economics forecast earlier this week that the RBNZ will actually start raising interest rates again in the second half of 2022.
Westpac's Stephens says he now expects that the OCR will remain on hold at 0.25% "for the foreseeable future".
"Previously, we were forecasting two cuts of 25bps in May and August this year, which would have taken the OCR to -0.25%."
In explaining the reasons for the change in call, Stephens cites the much better than expected recovery in the GDP, disruptions to global supply that might boost inflation as well as gains in oil and other commodity prices - and the rising house market.
Stephens says the housing market "has outstripped even our very bullish expectations".
As well as now predicting a peak in house price inflation of 20% later this year, up from the previous pick of 16%, he's now picking that for the whole of 2021 house prices will rise 15%.
"The reason for this surge in prices is the sudden drop in mortgage rates engineered by the RBNZ."
The surge in house prices is "particularly important", Stephens says.
"It is now abundantly clear that the RBNZ’s OCR cuts have had a stimulatory effect on house prices. In time, the buoyant housing market will stimulate consumer spending and inflation. The impact of monetary policy on house prices has proven far more potent than the RBNZ anticipated.
"Now is a time for the RBNZ to sit back and observe how the stimulus it has provided translates from house prices to the economy and then to inflation, rather than to cut further. It just does not seem likely that the RBNZ would cut the OCR amid 20% house price inflation."
Stephens says that "as always", there are two-sided risks around Westpac's new forecast.
"Should inflation and employment prove stronger or weaker than we currently anticipate, the OCR outlook would be adjusted up or down accordingly. In particular, we continue to regard a negative OCR as a perfectly viable policy option for the RBNZ. If the data unexpectedly turns in a more negative direction, the RBNZ would not hesitate the lower the OCR below zero."
Stephens continues to expect that the RBNZ will gradually taper the pace of Government bond purchases over the course of the year, from the recent average of $800 million per week down to around $500 million by the end of the year.