Economists widely expect the Reserve Bank to trim the Official Cash Rate (OCR) by 25 basis points tomorrow, taking it to 2.25%, while leaving the door open for further easing if the economy stumbles.
November’s Monetary Policy Statement will be the last of the year — and the final one under acting Governor Christian Hawkesby before Anna Breman takes over in December.
The OCR currently sits at 2.50%, following a front-loaded 50bp cut in October.
ASB chief economist Nick Tuffley said the central bank was likely to pair the cut with a message it remained ready to cut further if conditions deteriorated.
“Going forward, we anticipate the economy will show more convincing signs of recovery and that the RBNZ can stay on hold in 2026 at 2.25%. But if recovery underwhelms, the RBNZ will cut further.”
He said the forecasts and commentary in the monetary policy statement would “leave the door wide open for further easing if it is needed”.
“Doing so will keep a lid on wholesale interest rates, given financial markets are pricing in a 50:50 chance the RBNZ will cut the OCR to 2% over time. It also gives the Bank plenty of room to respond to how well — or not — the economy recovers over the nearly three months until the next meeting.”
Keep options open
ANZ chief economist Sharon Zollner agreed the Reserve Bank will want to keep its options open, even if no further cuts are expected next year.
“We expect the RBNZ to cut the OCR by 25bp to 2.25% and publish a forecast rate track bottoming out around 2.15–2.20%,” she said.
“We don’t expect the RBNZ to cut further next year barring a global shock, but it would be politic to leave the door open to that possibility in order to head off a potential U-turn in monetary conditions over the summer. A 25bp cut can therefore easily be justified on strategic and risk-management grounds.”
BNZ chief economist Mike Jones said the move will likely come with a cautious tone.
“We expect the Bank to leave the door open to a further reduction in February next year,” he said.
“A rate track troughing at around 2.15% would be appropriate and satisfy us that the Bank is very ready to act again, has a modest easing bias, but would prefer not to do so.”
Markets have largely priced in tomorrow’s move, but attention will turn to Breman’s first meeting in February — and whether green shoots in the economy will be enough to keep rates on hold.
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