The Reserve Bank of New Zealand (RBNZ) is set to announce its next Official Cash Rate (OCR) on February 19, 2025. This announcement follows a series of rate cuts, with the OCR currently standing at 4.25%, down from 4.75% after a 50 basis point reduction in November 2024.
Economists widely expect a further cut of 50 basis points to be implemented, reducing the OCR to 3.75%. RBNZ Governor Adrian Orr provided hints that this is likely during the upcoming review, stating that the central bank’s projections align with this potential reduction.
The backdrop for this decision includes slowing inflation rates, which have recently fallen to 2.2%, and the unemployment rate, which likely rose in the December quarter.
Financial experts and major banks are closely monitoring these developments. ASB Bank senior economist Mark Smith has expressed that “soft labour market data figures should continue to encourage further swift monetary policy easing. We expect a 50bp cut in February and a 3.25% OCR by mid-2025.”
ANZ Bank economists Henry Russell and David Croy anticipate that the unemployment rate will reach 5.1% based on the fourth-quarter labour market report set to be released on Wednesday.
They noted that “while typical volatility in the Household Labour Force Survey can lead to surprises on the day, an outturn reasonably close to our forecast shouldn’t stand in the way of the RBNZ delivering a 50bp cut in February.”
Kiwibank economists are also forecasting a “50bp cut at the RBNZ’s first meeting for 2025. And a 25bp cut in April/May.”
The discussion now revolves around how much the RBNZ will lower the cash rate below 3.5%. While the RBNZ’s forecast suggested a prolonged pause, Kiwibank economists foresee another reduction of 50 basis points to 3.0%, with potential for more cuts.