PHOTO: The Reserve Bank of New Zealand (RBNZ)
The Reserve Bank of New Zealand (RBNZ) is expected to implement another 50 basis point cut to the Official Cash Rate (OCR) in its upcoming meeting, aiming to bolster the nation’s fragile economic recovery. This move would reduce the OCR to 3%, following consecutive cuts in recent months.
📉 Economic Indicators Prompt Further Easing
Recent economic data indicates a sluggish recovery:
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GDP: Contracted by 0.2% in Q3 2024, signaling persistent economic weakness.
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Inflation: Annual consumer price inflation has declined to 2.2%, nearing the RBNZ’s target midpoint.
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Unemployment: Rising to 4.8% in Q3, reflecting a softening labor market.
These indicators suggest that the previous rate hikes have had a dampening effect on economic activity, necessitating further monetary easing.
💬 Expert Opinions
RBNZ Governor Adrian Orr has indicated that the Monetary Policy Committee is considering another 50 basis point cut in February, stating that such a move aligns with their mandate to maintain price stability while supporting economic activity.
ANZ Chief Economist Sharon Zollner noted, “The projection is technically on the fence regarding whether February will bring a 25bp or 50bp cut, but the Governor made it clear that another 50bp is the default at this point.”
Kiwibank Chief Economist Jarrod Kerr emphasized the need for continued easing, stating, “We believe rates need to be cut lower than the RBNZ’s 2025 forecast track to stimulate an economy struggling to get out of recession.”
📊 Infometric: Projected OCR Path
| Date | OCR (%) |
|---|---|
| August 2024 | 4.75 |
| October 2024 | 4.25 |
| February 2025 | 3.75 |
| End of 2025 | 3.00 |
Source: RBNZ projections
🏠 Implications for Housing Market
Lower interest rates are expected to stimulate the housing market. A Reuters poll forecasts a 6% rise in house prices in 2025, attributing this to the anticipated rate cuts.
🔮 Outlook
While the RBNZ’s aggressive rate cuts aim to revive economic growth, the path ahead remains uncertain. Global economic conditions, including recent U.S. tariffs, could influence New Zealand’s economic trajectory.