Mark Lister

This week, market forecasts are a little below that 2.9%, but that's still higher.

no matter whose you believe, that's still higher than what people were expecting six weeks ago before all this happened.

However, it is the June 2026 quarter where a bigger impact will be felt because of recent events.

That is when the Reserve Bank sees it pushing as high as 4.2%.

Now that would be well above their previous forecast of 2.7%.

That's what they had penciled in before the war broke out.

So 2.7% right up to 4.2%.

Now that's just a forecast, it's just an estimate, things could change between now and then, but when they last spoke to us, that is what they put forward as an educated guess.

So that would be more than double that 2% midpoint of their target band that they're aiming for.

Now a lot of uncertainty around the outlook, depends on the path of oil prices, depends on what the currency does, Kiwi dollars actually rebounded a little bit lately against the US dollar, that is, not so much against the Aussie, but that is good for inflation because it means all the things we buy, including fuel, get ever so slightly cheaper, so lots of balls up in the air at the moment.

We also don't know how some of these increased costs will be passed on.

in the form of transport, airfares, food prices, that sort of thing.

But when you look at market pricing for the official cash rate, market pricing implies an 88% chance of an OCR hike in July.

88% chance of a hike.

So that's interesting, isn't it?

And almost 75 basis points of hikes are priced in over the calendar year.

So that's basically the market saying we are pretty sure that the OCR will go up not once, not twice, but three times in 25 basis point increments.

And that would mean it ends the year at 3%.

That's 2.25% right now.

Will that happen?