Property Investment
2 min read
Author: Andrew Nicol
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Yesterday, the Reserve Bank kept the OCR at 2.25%.
But honestly, that’s not the part to pay attention to, because 3 important things happened yesterday:
The Reserve Bank now expects inflation to hit 4.2% in the June quarter. That’s up from the 3.1% we’re at today. And it’s well above its 1% to 3% target band.
That might make you think that the OCR is about to spike, and interest rates could start going up.
But not so fast. Because there is a major difference between ‘headline inflation’ and ‘core inflation’:
And the Reserve Bank cares more about core inflation. Just take a look at this slide from the presentation they gave yesterday (after the announcement) 👇
While the price of petrol is pushing inflation up. These cost-of-living increases aren’t widespread. They’re not yet impacting core inflation.
Which is why the Reserve Bank isn’t cranking up interest rates right now.
That’s also why the OCR came down last year, even as headline inflation went up.
So it’s NOT true that higher inflation always means a higher OCR.
As I’ve said before, raising the OCR in Wellington won’t open the Strait back up.
Banks increased their interest rates over the last month. That includes the 5-year rate, which is up 0.27% in just the last month.
But the real rate borrowers are paying has barely moved in some cases.
The average bank increased its 1-year rate from 4.49% to 4.59% over the last 30 days.
But behind the scenes, most are discounting right back to the same 4.49% they were advertising just a few weeks ago. (And back then, there was no discount).
So the interest rate you see advertised on TV, billboards and bus backs … those might have gone up. But in some cases, Kiwis won’t actually be paying more.
The USA and Iran also announced a two-week ceasefire yesterday.
The price of oil dropped back below US$100 a barrel.
But while oil traders expect the price of oil to come down … that doesn’t mean the problem’s gone away.
It just means the market has gone from full panic to nervous optimism. (Me too).
A ceasefire is hardly a peace deal. It could fall apart by the weekend.
Who knows what’s coming on Truth Social next?
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
This article is for your general information. It’s not financial advice. See here for details about our Financial Advice Provider Disclosure. So Opes isn’t telling you what to do with your own money.
We’ve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
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