New Zealand: Central Bank decides to decrease rates in October
Latest bank decision: At its meeting on 9 October, the Central Bank decided to reduce the Official Cash Rate (OCR) by 50 basis points, bringing it down to 4.75%.
Monetary policy drivers: The key domestic factors influencing the Central Bank’s decision included inflation within the target range of 1 to 3 percent and converging on the 2 percent midpoint, and weak economic activity characterized by subdued business investment, consumer spending and employment conditions.
Policy outlook: The Central Bank provided no explicit forward guidance on the future direction of interest rates, stating only that future changes to the OCR would depend on its evolving assessment of the economy. Our panelists expect more rate cuts this year and next in light of their forecasts for still-muted economic activity and mild price pressures.
Panelist insight: On the outlook, ANZ analysts said:
“Our OCR forecast is unchanged, with a follow-up 50bp cut pencilled in for November, and 25bp cuts after that as the OCR nears estimates of neutral.”
In a similar vein, Goldman Sachs analysts said:
“Looking forward, we continue to expect the RBNZ to lower the OCR another 50bp in November, before slowing the pace of cuts to 25bp per meeting in 2025 and reaching a terminal rate of 3.25% in July. While we expect the RBNZ to slow the pace of cuts as it approaches its estimate of neutral, we see risks skewed to the RBNZ continuing to cut by 50bp per meeting in early 2025 if the labour market deteriorates more than expected.”