ASB has reduced several of its fixed-term home loan interest rates. The six-month rate will decrease by 10 basis points, falling from 4.95% to 4.85%. The 18-month rate will be lowered by four basis points, reaching 4.45%.
The two-year rate decreases to 4.49%, while the three-year rate falls to 5.79%. The four-year rate is reduced to 5.09%, and the five-year rate drops to 5.15%.
Inflation reached the upper limit of the Reserve Bank’s target range, with a 3% increase compared to the previous year.
However, economists did not anticipate that it would change the course of interest rates, at least in the short term.
“The move to 3% is unwanted. But it shouldn’t stand in the way of the Reserve Bank delivering further rate cuts. They should take comfort in underlying inflation, which remains subdued,” Kiwibank economists said.
“Core measures of inflation strip out the volatile price movements. And encouragingly, core inflation fell from 2.7% to 2.5% – still within the Reserve Bank’s target band and the lowest since March 2021.”
“It is the Reserve Bank’s job to look through volatile movements in inflation and set policy for late next year. And in 2026, inflation is set to slow below the midpoint of the target band. We continue to expect a move to 2.25% in the cash rate next month.”
Economists at HSBC shared the same view. Chief economist Paul Bloxham said the country’s economy “appears to have ample spare capacity, which likely aided in reducing underlying inflation pressure, and which we see as likely to see further disinflation emerge.”
“Our central case sees the Reserve Bank cut by 25 bp in November. The combination of weak economic activity, easing underlying inflation and a still-soggy jobs market leaves little standing in the way of the Reserve Bank delivering further easing. We see this as enough to support a growth upswing in 2026.”
Economists from ANZ stated that the Reserve Bank had recognised that an increase in inflation was probable.
“Clearly the high-frequency data and inflation expectations are a must-watch between now and the November monetary policy statement, but today’s data certainly don’t present any challenge to the Reserve Bank’s August forecast: underlying inflation is slowing largely as forecast.
ANZ anticipates a 25 bp cut next month.