Shadow Board is divided over a 25 or 50 basis-point cut in the OCR in October

New Zealand Institute of Economic Research (Inc)
Media Release, 10 am Monday, 7 October 2024

For immediate release

The NZIER Shadow Board is equally divided over whether the Reserve Bank of New Zealand (RBNZ) should ease the Official Cash Rate (OCR) by 25 basis points or 50 basis points in the upcoming October Monetary Policy Review. Those members who recommended a 50 basis-point cut were concerned about the continued weakness and increased excess capacity in the New Zealand economy. They also cited the easing in headline inflation and inflation expectations, which warrant a less-restrictive interest rate setting. The rest of the members viewed a 25 basis-point cut is more appropriate for now, given some upside risks in non-tradable inflation remain.

Regarding where the OCR should be in a year’s time, the Shadow Board viewed that the RBNZ should continue with the easing cycle over the coming year, with the majority picking an OCR ranging between 3.5 percent and 4.5 percent. Some members recommended a gradual easing in the OCR, reflecting their views that the RBNZ should take a more cautious and data-dependent approach. Other members viewed that the RBNZ should ease the OCR more rapidly. They considered that the weak economic conditions suggest the need for more stimulus over the coming year.

Figure 1 Majority view for the OCR next year range between 3.5 percent and 4.5 percent

Figure 2 Individual participants’ recommended rate settings – 2 October 2024

Table 1 Participant comments

About the NZIER Monetary Policy Shadow Board

NZIER’s Monetary Policy Shadow Board is independent of the Reserve Bank of New Zealand. Individuals' views are their own, not those of their respective organisations The next Shadow Board release will be Monday, 25 November 2024, ahead of the RBNZ’s Monetary Policy Statement. Past releases are available from the NZIER website: www.nzier.org.nz

Shadow Board participants put a percentage preference on each policy action. Combined, the average of these preferences forms a Shadow Board view ahead of each monetary policy decision.

The NZIER Monetary Policy Shadow Board aims to:

•    encourage informed debate on each interest rate decision 
•    help inform how a Board structure might operate 
•    explore how Board members could use probabilities to express uncertainty.

For further information, please contact:
Ting Huang, Senior Economist
ting.huang@nzier.org.nz, 027 266 0969