In its November Monetary Policy Statement released today, the RBNZ set out a forward track that sees the Official Cash Rate dropping to about 3% by the middle of next year.
That was largely unchanged from the August MPS.
The RBNZ lifted its forecast GDP growth forecast for the March 2025 year to minus 0.1% from its previous forecast of minus 0.4%.
But further out, growth was forecast to be up just 2% in the 2026 year and 2.4% in 2027, down from previous forecasts of 2.7% and 3.2%, respectively.
Unemployment for the March 2025 year was forecast at 5.2%, down from its August forecast of 5.4%. That still represents another 11,000 newly unemployed people.
The central bank forecast unemployment at 4.7% and 4.4% in each of the 2026 and 2027 years, from previous forecasts of 5.1% and 4.6%, respectively.
“Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery,” the Monetary Policy Committee said.
The committee was confident that remaining inflation pressures will abate.
“Feedback from recent surveys and business visits suggest domestic price and wage setting behaviours are becoming consistent with inflation remaining sustainably at target,” it said.
Kiwibank chief economist Jarrod Kerr said the RBNZ had “delivered on expectations”.
“There was no discussion of a 75bp move and a 25bp move so the decision was pretty straightforward,” he said.
“Anything other than a 50bp would have been a shock, and hard to explain.”
But today’s move was just the tip of the iceberg, he said.
“The really interesting stuff was underneath. The RBNZ’s OCR track, which provides guidance on future policy moves, was lowered and pulled forward. It had to be … because they’re cutting in 50s, not 25s.”
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Despite the pathway being lowered the forecast endpoint for the OCR was lifted a little to 3.06% (from 2.98%).
“That’s bang on the 3.1% rate implied in wholesale rates,” Kerr said. “More cuts are required. And we need the cash rate below 4% asap. We advocate another 50bp move in February… but we now expect a 25bp move. And we’ve lifted our forecast terminal rate to 3%, no longer 2.5%. We’ve made these changes on the back of the RBNZ’s tweaks. But we note that the RBNZ may be too hawkish, again (as they were in May).”
ANZ chief economist Sharon Zollner said she was also expecting a 25bp cut in February.
“A comment from the Governor at the press conference suggested that a 50bp cut in February is the baseline expectation,” she said.
“Our OCR forecast is unchanged: we continue to pencil in 25bp cuts in February, April and May, taking the OCR to 3.5%.”
As always, the speed and extent of easing would be highly data-dependent, she said.
“That’s particularly true given there is such a long gap to the next meeting. The odds of a 50bp cut in February have lifted, given the Governor’s comments, but the data between now and then will carry the day, and there are clear signs of a broad-based lift in activity – from a very weak starting point.”
ASB chief economist Nick Tuffley said the RBNZ had left the door wide open for its future moves. But the OCR track for the March quarter had an average of 4.07% which implied a fairly high chance of a 50 basis point cut in February.
“From here we expect the RBNZ will slow the pace of easing to 25bp moves in 2025, but the risk is a further 50bp cut.
“However, the ultimate pace will be dictated by events. It is also now a three-month gap until the RBNZ next meets, with a full cycle of quarterly domestic data and President Trump’s inauguration in between.”
In an unusual move, Prime Minister Christopher Luxon and Finance Minister Nicola Willis held a press conference ahead of the Reserve Bank’s regular media event.
Asked about Luxon’s comment that: “mortgage relief is on the way because our plan is supporting lower inflation”, Orr said: “Success has thousands of parents, I’m very pleased to no longer be an orphan”.
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.
