Economists broadly anticipate that the Reserve Bank will reduce the Official Cash Rate (OCR) by 25 basis points tomorrow, lowering it to 2.25%.
The current OCR is at 2.50%.
ASB chief economist Nick Tuffley said the central bank will likely accompany the OCR cut with a statement indicating it is prepared to reduce rates further if economic conditions worsen.
“Going forward, we anticipate the economy will show more convincing signs of recovery and that the RBNZ can stay on hold in 2026 at 2.25%. But if recovery underwhelms, the RBNZ will cut further,” Tuffley said.
He said the forecasts and commentary in the monetary policy statement would clearly leave the door open for additional easing if circumstances require it.
“Doing so will keep a lid on wholesale interest rates, given financial markets are pricing in a 50:50 chance the RBNZ will cut the OCR to 2% over time.”
“It also gives the bank plenty of room to respond to how well — or not — the economy recovers over the nearly three months until the next meeting.”
ANZ chief economist Sharon Zollner concurred that the Reserve Bank is likely to keep its options open, even though no additional rate cuts are anticipated next year.
“We expect the RBNZ to cut the OCR by 25 bp to 2.25% and publish a forecast rate track bottoming out around 2.15–2.20%,” Zollner said.
“We don’t expect the RBNZ to cut further next year barring a global shock, but it would be politic to leave the door open to that possibility in order to head off a potential U-turn in monetary conditions over the summer. A 25 bp cut can therefore easily be justified on strategic and risk-management grounds.”
Meanwhile, BNZ chief economist Mike Jones expects the bank to be open for a further reduction in February next year.
“A rate track troughing at around 2.15% would be appropriate and satisfy us that the Bank is very ready to act again, has a modest easing bias, but would prefer not to do so.”
November’s Monetary Policy Statement will be the year’s final update. It will also be the last under acting Governor Christian Hawkesby before Anna Breman takes over in December.