The Reserve Bank of New Zealand has kept the Official Cash Rate (OCR) at 0.25 percent, and left its Large Scale Asset Purchase and Funding for Lending programmes unchanged, but accompanied the decision with a hawkish statement about future rate rises.

In its latest Monetary Policy statement yesterday, the bank reintroduced forward forecasts for the OCR and indicated it may become one of the first central banks to start hiking rates. The announcement saw an immediate rise in the NZ Dollar.

The RBNZ is pencilling in 150 basis points of interest rate rises between 2022 and 2024, starting with a projected 25 bps hike in mid-2022.

But the rises are far from baked in. The bank is basing its projections on a “working assumption” that there will be a re-opening of borders in early 2022, but with the rider from governor Adrian Orr that “We are talking about the second half of next year, who know where we will be by then”.

On house prices, the Reserve Bank sees even more of a slowdown in growth than Treasury, which forecast in last week’s Budget that annual house price growth would slow to 0.9 per cent by June next year. In fact, the RBNZ is predicting house price growth to soon come to a complete halt, while still stopping short of predicting an actual fall in prices.

Cautioning again that any projections around asset prices are always “wildly uncertain”, Orr said the bank was “projecting zero quarterly growth rates from the middle part of this year for a time".