The Chief Economist at Westpac NZ, Kelly Eckhold, says there is some commentary about that a 75bp rate cut from the Reserve Bank of New Zealand could happen at the Bank’s meeting tomorrow, Wednesday, October 9, 2024.
Eckhold sees a 75bp rate cut as not very likely, and not appropriate right now.
The WPAC analysis points out that the RBNZ signaled in its August Monetary Policy Statement (MPS) that it projected two 25 basis point cuts. Westpac’s forecast calls for 50 basis point cuts — a notable adjustment for the RBNZ.
The analysis highlights a key decision for the central bank: either take a gradual approach with a 25 basis point cut now and potentially increase the pace in November, or move more swiftly towards neutral interest rate levels by implementing two 50 basis point reductions.
The Westpac analysis downplayed the likelihood of a more drastic 75 basis point cut, noting that such measures are typically reserved for more severe crises, as seen during the COVID-19 pandemic and the global financial crisis. The last time cuts of more than 50 basis points were implemented was during those periods.
If the RBNZ opts for 100 basis points of cuts by the end of the year, it would total 125 basis points in reductions for 2024. This approach would align with the actions of other economies, given the progress in curbing inflation alongside a weakened economy and labor market. Despite these concerns, Westpac stressed that there is no need for panic at this stage.
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The Reserve Bank of New Zealand announcement is due at 0100 GMT on Wednesday, which is 2100 US Eastern time on Tuesday.
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