A fresh cut is taken as a given at the final rates review by New Zealand’s central bank this year.
The question is, how low does the nation’s Reserve Bank envisage taking the official cash rate into 2026?
All will be revealed on Wednesday when the RBNZ meets, with expectations of another 25 basis point cut, bringing the standard to 2.25 per cent.
That’s down from 5.5 per cent last August, a run of 300 basis points to date, including a double 50 basis point cut in October.
“A cut to 2.25 per cent this week is perfectly priced by markets and requires little justification. The Kiwi economy still needs more support,” Kiwibank chief economist Jarrod Kerr said.
The economic part of the equation is obvious: New Zealand suffered an 0.9 per cent contraction last quarter, with unemployment hitting an eight-year high of 5.3 per cent.
However, with headline inflation rising to 3.04 per cent, and food inflation at 4.7 per cent, the bank risks a fresh inflation shock should it keep cutting to surge the Kiwi economy back to life.
That’s why all eyes will be on the bank’s latest OCR tracking map to see whether it believes it will keep cutting in 2026.
ANZ chief economist Sharon Zollner said 25 basis points was “a lock” and a bottoming out at 2.15-2.20 per cent, giving a prospect of one more cut in 2026, was likely.
“When we sampled market pricing … it had the OCR bottoming out at 2.11 per cent in May,” she said.
Mr Kerr has been scathing of the RBNZ’s hawkishness through 2025, arguing the bank should have cut more steeply to get to 2.5 per cent, and should even consider another 50 basis points on Wednesday.
“Why not get us there, cut with confidence, to fuel confidence. It’s just the sort of shock treatment the economy needs,” he said.
The bank has consistently been too confident that it has done enough easing.
Previous tracking published in May saw the trough at 2.9 per cent, and updated tracking in August signalled the bottom of the cycle would be 2.5 per cent.
The meeting is the last with Christian Hawkesby at the helm, with Swedish appointee Anna Breman becoming governor on December 1 – with her first monetary policy decision coming in February 2026.
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