The Reserve Bank of New Zealand has cut the Official Cash Rate by 50 basis points, taking it from 4.75% to 4.25%.
Some banks have reacted quickly, with Kiwibank cutting its variable home loan and business lending rates and ASB dropping interest rates across personal, business and rural lending by 0.50%.
Now, much of the focus will be on new economic forecasts and where the RBNZ expects the cash rate to land next year.
A consensus of economists and financial markets had expected the cut which has now been delivered.
Reserve Bank leaders will appear before Parliament’s Finance and Expenditure Committee tomorrow morning, and reaction from Finance Minister Nicola Willis and Prime Minister Christopher Luxon is expected at a 2.30pm press conference today.
STORY CONTINUES AFTER LIVE BLOG
EARLIER TODAY
The Reserve Bank will also publish its November Monetary Policy Statement, including updates to its economic forecasts and its current expectation for where the OCR will track in 2025.
At 3pm Reserve Bank Governor Adrian Orr will hold a press conference which will be live-streamed here.
ASB economists say the case for another sizeable cut remains almost as strong as it was in October.
They describe it as the “least-regrets” path at present.
“With inflation back around the target mid-point and spare capacity starting to build up, the amount of monetary restraint needs to be quickly pared back. A 50bps cut would achieve that,” they say.
But a 75bps cut would likely overdo it given most of the recent developments have been in line with the Reserve Bank’s August economic outlook.
HSBC Australia and New Zealand chief economist Paul Bloxham said he expected the RBNZ’s board would consider cutting by 25bps, 50bps or 75bps this week.
But he predicted decision-makers would settle on a 50bps move, “judging, in the end, that this would be the most prudent move that balances the risks to both growth and inflation”.
Kiwibank chief economist Jarrod Kerr says he’s expecting to see the OCR track “pushed lower and pulled forward” given the RBNZ has delivered more cuts than anticipated in August.
In other words, lower rates sooner - at least compared with the last outlook in August.
“The August OCR track implied 25bps moves, and we’re getting 50bps moves, as required. And then there’s the culmination of data that has come in weaker than the RBNZ’s already low forecasts,” Kerr said.
“Specifically, the inflation data for the September quarter saw headline inflation fall to 2.2% - which compared to the RBNZ’s August forecast of 2.3%, and May’s forecast of 3.0%. That’s some move … back towards the RBNZ’S targeted sweet spot of 2%.”
On Tuesday ANZ cut most of its fixed home loan interest rates ahead of the OCR decision.
The largest of the cuts will be to its six-month terms, which drop 26bps for both the special (6.24%) and standard (6.84%) rates.
The bank’s standard one-year fixed-term rate will fall 20bps from 6.59% to 6.39%. Its special one-year rate also drops 20bps to 5.79%.
ANZ’s special and standard two- and three-year fixed rates will be cut by 10bps.
The bank is also making changes to some of its term deposit rates, the largest of which is a 25bps cut to its 210-day terms (5%).
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
