New Zealand: RBNZ delivers another 50 bps cut to OCR at last 2024 meeting – UOB Group

The Reserve Bank of New Zealand (RBNZ) decided to reduce the official cash rate (OCR) by 50 bps to 4.25%. In the accompanying media release, the RBNZ flagged that “annual consumer price inflation has declined and is now close to the midpoint of the Monetary Policy Committee’s 1 to 3 percent target band. Inflation expectations are also close to target and core inflation is converging to the midpoint, UOB Group’s Economist Lee Sue Ann notes.

Committee expects to be able to lower the OCR further early next year

“The Reserve Bank of New Zealand (RBNZ) decided to reduce the official cash rate (OCR) by 50 bps to 4.25% again, as expected. This marks the third straight reduction after the RBNZ began its easing cycle in Aug, lowering rates by 125 bps in little more than three months.”

“In today’s release of the November Monetary Policy Statement, the RBNZ’s new forecasts show the average OCR falling to 3.83% by the middle of next year, suggesting it may move to more gradual rate cuts.”

“Our baseline expectation is that the RBNZ will reduce the pace of easing to standard 25bp cuts for the first half of next year, to reach 3.50% by 1H25, and for the OCR to reach 3.00% by 2H25. But as we previously cautioned, the monetary policy path is unlikely to be smooth, and incoming economic data will ultimately be the driving factor.”