Kiwis battling the cost of living crisis could face some more pain in the short term but later this year there could be cuts to mortgage rates, Milford Portfolio Manager Mark Riggall says.
Kiwis have been battling the cost of living crisis for over two years, with inflation remaining stubbornly high at 4.7 percent – still above the Reserve Bank's (RBNZ) target of between 1 and 3 percent.
The official cash rate (OCR) also remains high at 5.5 percent but the RBNZ has left it unchanged for its past five meetings after tightening it 12 consecutive times before that.
Then adding to all this, thousands of Kiwis re-fixed their mortgages last year from a low rate seen during COVID-19 of around 2-3 percent to rates of around 6-7 percent.
Riggall joined AM on Thursday morning telling the show despite inflation coming down in recent months, the RBNZ could be looking at a hike to interest rates.
"Investors are really struggling to price the end of this cycle, this last mile of inflation is really tricky," Riggall told AM co-host Melissa Chan-Green.
"So rate cuts in the US have been expected as soon as the next meeting, that's now being pushed back to June. Here in New Zealand, there are some local banks calling for hikes from the RBNZ and the market is certainly pricing the chance of that happening versus the chance of a cut happening when we were looking from the beginning of the year."
But while Riggall is warning about hikes in the short term, he had some promising news for mortgage holders for the medium to long term.
"I think even if we get a hike and I think it's unlikely, it will swiftly be followed by cuts further down the road because the economy's clearly struggling under the weight of these hikes so far," he said.
"So I do think we're close to the end of this hiking cycle."
Riggall isn't the only expert warning about a potential hike in the short term.
Independent economist Cameron Bagrie told AM on Tuesday despite there being a "fair bit of backslapping" to start 2024, the market has done a complete "somersault".
"The market's done a complete somersault. There was a fair bit of backslapping at the end of 2023, the early part of 2024, that we've got rid of inflation. It's heading in the right direction globally and in New Zealand, interest rates are going to be coming down," Bagrie said.
"You throw that combination together and you got the recipe of the Reserve Bank going to be discussing whether the need to tweak or lift the official cash rate, push it up over the next few months, as opposed to pushing in an interest rate cut, which the market was perhaps hoping a little bit too much for."
Watch the full interview above.
