On February 2, Gareth Kiernan, chief forecaster at consulting firm Infometrics, said New Zealand’s economy would head toward recession this year as rising interest rates and a weak labor market hit household spending. He believes that the Federal Reserve Bank of New Zealand’s monetary policy tightening will take full effect in the next 18 months, and by the end of 2024, the inflation rate will return to the central bank‘s 1%-3% year-on-year target range.
The New Zealand economy is expected to continue shrinking until March 2024 as fixed mortgages mature and households grapple with higher interest rate levels. Kiernan added that the Reserve Bank of New Zealand was on track to raise the official cash rate to 5.75% by mid-2023, bringing mortgage rates above 7% for the first time since 2008.
