Economists widely expect the RBNZ to announce a 25bp cut this week
Economists are widely expecting the Reserve Bank of New Zealand (RBNZ) to cut the official cash rate (OCR) this week, despite concerns over rising domestic and global inflation.
The monetary policy review, scheduled for Wednesday, comes as global uncertainty intensifies following the Reserve Bank of Australia’s decision to hold its rate at 4.1% and ahead of new tariff announcements by US President Donald Trump.
Potential retaliatory measures from the European Union and Asian economies have sparked fears of a slowdown in global growth.
Former Reserve Bank governor Adrian Orr indicated in February that interest rates could fall more quickly than previously projected. Market sentiment has since shifted towards expecting a 25 basis point (bp) cut, bringing the OCR to 4.99% — a level mortgage broker Tony Mounce described as “at the fringes” for New Zealand.
“If the number has a four, take it,” Mounce said, noting the unpredictability of global markets. “We live in uncertain times and you don’t know what Trump, or the world, is going to do next.”
While a lower OCR may benefit first-home buyers by easing mortgage rates — currently sitting between 5% and 6% for one- and two-year terms — Mounce cautioned that returns on investment funds such as KiwiSaver would likely drop.
Kiwibank said a 25bp cut was “baked into the cake”, with ANZ also stating a cut appeared “locked in”. RBNZ chief economist Paul Conway recently told The Post the bank expects inflation to rise to around 2.7% later this year but said it’s now too late to head that off with monetary policy alone.
BNZ’s head of research, Stephen Toplis, forecast not only a cut on Wednesday but also a signal of more easing to come, despite recent survey data showing rising consumer inflation expectations and pricing intentions.
Still, some economists argue the RBNZ should wait. Westpac’s chief economist Kelly Eckhold said recent data shows an improving economy and persistent inflation. “Given the Reserve Bank’s single mandate of targeting inflation, it’s hard to make the case for cutting rates at every meeting from here,” Eckhold said.
How will a lower OCR affect your mortgage or KiwiSaver returns? Share your thoughts below.
