The Reserve Bank of New Zealand (RBNZ) is widely expected to announce a 25 basis point cut to its Official Cash Rate (OCR), bringing it down to 3 per cent. The announcement is scheduled for 12pm AEST. This move comes as economists and market analysts closely monitor the central bank’s monetary policy decisions amid a backdrop of fluctuating economic indicators.
Analysts from ANZ anticipate the rate cut, noting that the primary focus will be on the RBNZ’s updated OCR forecast and any indications of future policy direction. While recent data has been mixed, ANZ suggests a potential reduction of 10-15 basis points off the OCR track, with a possible trough of 2.70-2.75 per cent. ANZ expects the RBNZ to eventually cut the OCR to 2.50 per cent as soft high-frequency data impacts the hard data, but this may occur later rather than immediately.
TD Securities also predicts a 25 basis point cut to 3 per cent, expecting this to be the terminal rate, though the OCR track is likely to suggest 2.75 per cent, reinforcing a data-dependent easing bias. They believe that the refreshed set of forecasts are unlikely to change significantly, as weaker labour data is offset by picking up activity data, leaving GDP forecasts relatively unchanged.
NAB economists suggest the key question is how much further rates might go after the expected cut. Their BNZ counterparts believe that at least one more cut to 2.75 per cent is needed. NAB anticipates a rate track similar to that of May, with a decent chance of a further cut to 2.75 per cent, and the RBNZ may even concede that further action beyond a 2.75 per cent low might be required.
