Economists expect the Official Cash Rate (OCR) to drop as the economy faces challenges from a five-year high unemployment rate and the impact of US tariffs on New Zealand goods.
In July, the Reserve Bank of New Zealand (RBNZ) kept the official cash rate steady at 3.25%, maintaining the OCR level set in May.
Kiwibank senior economist Mary Jo Vergara said they anticipate the OCR to be reduced by 25 basis points, to 3%.
“Financial markets, they’re pretty much expecting the Reserve Bank to cut interest rates by that 25 basis points, or 0.25%, next week,” Vergara said.
Vergara said that next week will mark a full year of OCR cuts, yet the economy still isn’t as strong as one would expect.
She said this clearly indicates that additional cuts are necessary.
ANZ’s OCR preview also predicted the OCR would drop to 3% and may be reduced even further down the line.
ANZ has recently announced a drop in certain fixed and special home loan interest rates ahead of the OCR announcement.
Meanwhile, for ASB senior economist Mark Smith, the OCR might be reduced to below 3%.
“We can still see the Official Cash Rate pushed, you know, below 3%, to try and pick the economy up and get that 2% inflation maintained and locked up,” he said.
Smith also said that the anticipated OCR cut next Wednesday reflected the Reserve Bank’s confidence in the economy.
“We’re looking at a pretty uncertain global environment. In terms of things locally, things have not really kicked on to the New Zealand economy.”
“There’s quite a lot of volatility, uncertainty, and we could see firms and households pretty much hold back on economic activity.”