Economists debate Reserve Bank move
“Heads should roll at the Reserve Bank if it decides to move the official cash rate (OCR) this month,” said Brad Olsen (pictured above), CEO of Infometrics, as the economy continues to align with RBNZ’s previous forecasts.
Despite unemployment hitting 4.6% in the June quarter, Olsen argued that the Reserve Bank’s predictions did not suggest a rate cut until August 2025.
“We’re quite literally at a complete loss as to what might happen next week,” Olsen told RNZ, expressing concern over any potential early rate cuts.
Debate over timing of rate cuts
BNZ and Kiwibank economists have called for an OCR cut in August, citing economic weakness and pressures on businesses.
“Is there an argument for cutting next week? Absolutely,” Olsen said, though he pointed out that the Reserve Bank previously indicated no relief was needed until next year.
“Our official forecast is for a February cut,” he said, while acknowledging the possibility of an earlier move.
Pressure mounts on the Reserve Bank
BNZ economists said that the economy is “buckling under the pressure” of tight monetary conditions, with rising unemployment, government cutbacks, and falling migration adding to the strain.
“Business profitability is coming under extreme pressure,” they noted, advocating for a progressive easing cycle starting this month.
Kiwibank economists also supported an August cut, emphasising that “the economy needs support” and warning of potential market volatility if the Reserve Bank holds off.
Market uncertainty and credibility concerns
Despite growing calls for an August rate cut, there is skepticism about the Reserve Bank’s next move.
Kiwibank economists cautioned that a rate cut could be challenging given the central bank’s recent signals of possible rate hikes.
“There’s a credibility issue for the RBNZ's forecasting team,” they said, adding that the Reserve Bank could argue that changing facts justify a policy shift.
However, the risk of market sell-offs and rate spikes remains a concern for traders, RNZ reported.
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