Kiwibank predicts 0.5% OCR cut

Kiwibank economists believe the Reserve Bank will cut the Official Cash Rate to just 0.5%, with the possibility of a major cut in November.

The RBNZ kept the OCR at a record low of 1% last month, yet Kiwibank economists say weak economic data, deteriorating business confidence and lower inflation expectations will force the central bank to take more decisive action. 

Chief economist Jarrod Kerr (pictured), and senior economist Jeremy Couchman, said: "Businesses have highlighted weak demand, capacity constraints, (government) policy uncertainty, and poor pricing power as reasons to worry about profitability, reduce investment intentions, and lower inflation expectations. 

"All of the above point to growth running at or around 1%, half the current run rate, and a third of what we need. The deterioration in business intentions demands a policy response. We will get a monetary policy response, but what we really need is a fiscal policy response.

"We now expect the RBNZ to cut to just 0.5%, and we see a good chance the bank delivers in just one move in November," they added.

The economists say there's a "good chance" of a 0.5% cut in November. The risk of another move, to 0.25% "is uncomfortably high, and will hurt savers", they added.


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