RBNZ cut just the start: Zollner

The Reserve Bank of New Zealand (RBNZ)’s move to lower interest rates has brought forward the timing of a long-awaited easing cycle, according to ANZ New Zealand Chief Economist Sharon Zollner.

The RBNZ cut its official cash rate by 25 basis points at its August meeting, its first such move in more than four years, and sooner than anticipated. The OCR now sits at 5.25 per cent.

Speaking on the 5 in 5 with ANZ podcast, Zollner said the timing around what happened next had now changed.

“We still see [the OCR] going down to about 3.5 per cent as before… but sooner,” she said.

The RBNZ’s updated forecast is now consistent with cuts at the central bank’s next three meetings.

“Now that the Reserve Bank’s started cutting, the default has to be simply a 25-basis-point cut at each meeting,” Zollner said. “So that’s what we've pencilled in. But there are obviously risks on both sides of that.”

Zollner described the conditions that led to the RBNZ’s decision as a “threshold being crossed”.

Although there are “still some upside risks”, she said, the bank was confident inflation had “some significant downward momentum” – and the RBNZ would continue to manage it toward its target range of 1 per cent and 3 per cent, “one way or another”.

Zollner said the pace of any easing from the RBNZ would still be data dependent.

“The market will be very keen to price cuts, quite aggressive cuts from here,” she said. “But we would just caution that it will still depend very, very much on where the data goes from here.”