The Reserve Bank’s Next Move: A Potential OCR Trim and Future Easing
The Reserve Bank is poised to make a significant move, with economists widely anticipating a 25 basis point reduction in the Official Cash Rate (OCR) to 2.25%. This decision comes as a strategic move to support the economy, especially if it shows signs of weakness. The upcoming Monetary Policy Statement, set to be the last of the year, will be a crucial indicator of the Bank’s future actions.
The OCR has already been trimmed by 50 basis points in October, bringing it to 2.50%. This move was a bold step towards stabilizing the economy. Now, the Bank is expected to signal its readiness to cut further if the economy doesn’t recover as anticipated.
ASB’s Take: A Balanced Approach
ASB’s chief economist, Nick Tuffley, highlights the Bank’s likely strategy. He predicts a balanced approach, stating that the economy will likely show signs of recovery, keeping the OCR at 2.25% in 2026. However, if the recovery falls short, the Bank is prepared to cut further, ensuring a stable economic environment.
ANZ’s Perspective: Keeping Options Open
ANZ’s chief economist, Sharon Zollner, agrees that the Bank should maintain flexibility. While no further cuts are expected next year, leaving the door open to potential easing is a strategic move. This approach helps manage wholesale interest rates and provides the Bank with the necessary room to respond to economic fluctuations.
BNZ’s View: Cautious Optimism
BNZ’s chief economist, Mike Jones, offers a cautious perspective. He expects the Bank to signal its readiness to act again in February, with a potential rate cut on the horizon. This move demonstrates the Bank’s commitment to a balanced approach, easing bias, and a willingness to act if needed.
Market Anticipation and Future Focus
Markets have already priced in the expected OCR reduction. However, the real test will come in February when Anna Breman takes over as Governor. The economy’s performance will be crucial in determining whether the Bank maintains its current stance or makes further adjustments to support economic growth.