New Zealand: Central Bank cuts rates in August
At its meeting on 14 August, the Central Bank cut the Official Cash Rate by 25 basis points to 5.25%.
The decision to cut rates was driven by soft domestic real-sector data, declining price pressures, and the Bank’s belief that inflation would trade within the 1.0–3.0% target range going forward.
The Central Bank suggested that interest rates would fall further going forward. Our panelists see 75 basis points of further cuts by end-2024.
ANZ Bank analysts commented on future monetary policy decisions:
“Now the RBNZ has kicked off its loosening cycle, the default decision is a further 25bp cut at each meeting. Our new forecast track accordingly pencils in such a track, to a low of 3.5% as before. In practice, the speed and extent of easing will be highly data dependent.”
Goldman Sachs analysts said:
“We continue to expect the RBNZ to cut rates -25bp in both October and November this year, before cutting rates -25bps at every meeting in 2025 until reaching a terminal rate of 3.25%. […] In our view, while it is possible the RBNZ steps up the pace of cuts to -50bp at some stage, October looks unlikely given it will be difficult to undershoot the RBNZ’s very weak -0.5%qoq forecast for GDP growth in 2Q2024.”