However, Hawkesby cautioned “the rain was falling; the cyclone was descending” as the Reserve Bank’s Monetary Policy Committee wrote its statement published on Wednesday.
“There’s a lot we still don’t know about the cyclone in terms of what the total impact will be; what inflationary pressures it will create,” he said.
“We put out a central projection because people like to see black and white numbers and some guiding posts of where we’re headed, but there are always really big ranges of uncertainty around that.”
The Reserve Bank expected the weather events to add 0.3 percentage points to consumer inflation in both the first and second quarters of 2023.
It also expected the events to add a percentage point to annual gross domestic product (GDP).
However, Hawkesby noted, “There are a lot of moving parts. So even if fixed-rate mortgages stay where they are, floating rate mortgages are going to rise.”
ANZ senior strategist David Croy on Friday stressed risks to inflation, and therefore interest rates were clearly to the upside.
“In recent days, the sense that the Reserve Bank may have more work to do in the wake of recent weather events has put further upward pressure on [wholesale interest] rates,” Croy said.
“Higher US bond yields have added to the local market’s woes, as did this week’s lacklustre New Zealand Government Bond tender, and as a result, most New Zealand [wholesale] interest rates are back at or near December highs.”
Coming back to Hawkesby, he acknowledged the difficulties central bankers face, using a combination of lagging, real-time, and forward-looking data to implement a policy that takes 12 to 18 months to take effect.
“You sort of live with a knot in your stomach in the sense of, you can’t see perfectly into the future, and you know there will be these lags and you’re not going to get the perfect indicator,” he said.
“There’s no one who rings a bell and says, “It’s time now [to stop hiking the OCR]”. That’s a judgement that needs to be made.”
The Reserve Bank expects it will hike the OCR by another 75 basis points, stopping once the rate gets to 5.5 per cent by the middle of the year.
Hawkesby said the Bank had seen “some cooling” in data released more frequently, including business confidence surveys, credit card spending and building consents.
However, he said it was still “early days” and the Reserve Bank wasn’t at a point where it could “announce victory” in its battle against inflation.