Kiwibank leads deposit interest rate hikes

  • 28/11/2016
Kiwibank has increased its term deposit rates from between 0.15 and 0.25 percent (Newshub.)
Kiwibank has increased its term deposit rates from between 0.15 and 0.25 percent (Newshub.)

There is good news for savers looking for long-term gains with Kiwibank increasing its long-term deposit interest rates.

The bank's increased some of its rates as much as 0.25 percent as inflation continues to lift globally.

Nationally, the consumer price index rose 0.3 percent in the three months to the end of September, up from the 0.2 percent pace originally reported on October 18.

The annual inflation rate growth was revised up to 0.4 percent, closer to the Reserve Bank's 1-3 percent target inflation band.

NZIER senior economist Christina Leung says borrowers will get hit in the pocket.

"When we see interest rates lifting, for people that are saving, people that have deposits, it's good news. For borrowers, not so much because it means an increase in borrowing costs."

Ms Leung says expensive overseas borrowing makes domestic investment more attractive.

"We would expect to see further increases in both borrowing and deposit rates."

She says economic policies outlined by the incoming United States President Donald Trump are one of several things encouraging global inflation.

"There is the expectation that many of his policies may be inflationary. Which ones he puts through is highly debatable but overall inflation expectations are starting to lift globally and that's having an effect on longer term interest rates."

On November 10 the Reserve Bank slashed the official cash rate (OCR) to a record low of 1.75 percent.

It was the third time this year the OCR has been cut.

During the announcement, Reserve Bank Governor Graeme Wheeler said the latest cut, along with other policy settings, should see growth strong enough to have inflation settle near the middle of its target range of 1-3 percent.