An expected rise in the official cash rate on Wednesday won't have an immediate effect on inflation, an economist says.
Sense Partners' Hannah Ouellet told Breakfast it's likely the Reserve Bank will increase the OCR by 50 basis points to 2.5%. The OCR is currently sitting at 2%.
There have been three rises so far this year - February, April and May.
Ouellet said a hot labour market and super high inflation of 6.9% were the "big drivers" behind any increase in the OCR on Wednesday.
She told Breakfast she isn't concerned there's been three OCR rises in a row, describing them as a "resolute pattern" of the Reserve Bank to rein-in inflation, which is both its goal and its priority.
However, Ouellet said any increase in the OCR wouldn't have an immediate effect on inflation.
She said any decrease in inflation or relief in the cost of living crisis "will probably come later".
Ouellet described the immediate effects as a "little bit different". She explained increasing interest rates will be "really good news" for those with savings or term deposits, but 'bad news" for borrowers and those with shares.
People would notice their KiwiSaver investments and the NZX share portfolios falling, Ouellet said.
"In the short-term and at an individual household level it can be quite concerning, but I believe it's a short-term trade-off for a long-term sustainable economy."
Ouellet said any rise in the OCR probably wouldn't have any effect on house prices. Ouellet explained some banks had already "baked in" any increase into mortgage rates as they were expecting there to be one.
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