New Zealand's central bank has warned Kiwi mortgage holders not to expect interest rate cuts until 2025.
In a hawkish statement delivered on Wednesday, Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr held the official cash rate (OCR) at 5.5 per cent.
The RBNZ has left the OCR untouched since May, with Mr Orr repeating his "watch, worry and wait" mantra for inflation to slow.
Consumers price index (CPI) inflation peaked at 7.3 per cent in June, and was last measured at 5.6 per cent in the year to September.
Mr Orr added another w-word to his list alongside the November monetary policy statement: "willing".
"I'd certainly highlight our willingness to move if we have to ... the watch, worry and wait has now got a 'willing' sitting in there as well."
The RBNZ projection for future OCR settings hits a peak of 5.7 per cent in June next year, and does not begin to fall back below 5.5 per cent until a year later.
Mr Orr said that was not the RBNZ pricing in another rate rise, saying instead "we retain optionality (and) we are showing an upward bias".
The projections are at odds with a more rosy market sentiment, which suggested rate cuts from the second half of next year.
A hold at the November meeting was tipped by every major NZ bank.
While CPI inflation is forecast to return to the target band by September next year, the bank has not predicted it will cut rates until 2025.
"Interest rates are restricting spending in the economy and consumer price inflation is declining, as is necessary to meet the committee's remit," Mr Orr said.
"However, inflation remains too high, and the committee remains wary of ongoing inflationary pressures.
"Demand growth has eased, but by less than anticipated over the first half of 2023 in part due to strong population growth.
"The OCR will need to stay restrictive, so demand growth remains subdued, and inflation returns to the one to three per cent target range."
The OCR is already at its highest level since November 2008, the aftermath of the global financial crisis.
Central bank economists also believe unemployment - currently at 3.9 per cent - will continue to climb, ticking up each quarter to hit 5.1 per cent at year's end.
There is some good news from fresh economic projections: the bank believes NZ will avoid recession this year.
It now tips GDP growth of 0.3 per cent and a flat quarter in the back half of 2023, before a return to heartier growth in 2024.
The country was understood as in recession earlier this year until revised Stats NZ figures showed shallow GDP growth was in fact a flat quarter.
This week's review was the last opportunity to change the OCR this year, with the RBNZ not due to meet again until February.
Mr Orr said the bank would remain appraised of data through the break, before signing off from his last press conference for the year.
"Have a good Christmas and keep those jets cooled," he said.
