Shadow Board is in favour of lowering the OCR by 50 basis points in November

The NZIER Monetary Policy Shadow Board recommends that the Reserve Bank of New Zealand (RBNZ) ease the Official Cash Rate (OCR) by 50 basis points to 4.25 percent in the upcoming November Monetary Policy Statement. With annual inflation now back to within the RBNZ’s 1 to 3 percent inflation target band while the New Zealand economy remains soft, most members agreed that a 50-basis point cut in November is appropriate. One member also pointed out that, given the 3-month gap between the November and February meetings, a 50-basis point cut in the upcoming meeting is appropriate so that the OCR can return to its neutral rate within the next 12 months.

Regarding where the OCR should be in a year’s time, most Shadow Board members picked an OCR ranging between 3.0 percent and 4.0 percent. This reflects the Shadow Board’s view that the RBNZ should continue to reduce the OCR towards its neutral level, given that inflation has returned to the target range, but economic growth remains weak. One member pointed out that the RBNZ needs to watch for the downside risk to the New Zealand dollar due to a potential increase in US trade restrictions, which could limit the extent of OCR cuts over the coming year. 

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, 17 February 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