RBNZ cuts OCR by 50pb, signals further cuts sooner

As expected, the Reserve Bank cut its official cash rate (OCR) to 3.75% and signalled further cuts of up to 90 basis points this year but no cuts beyond that.

Wednesday, February 19th 2025, 2:37PM

by Jenny Ruth

As expected, the Reserve Bank cut its official cash rate (OCR) to 3.75% and signalled further cuts of up to 90 basis points this year but no cuts beyond that.

So sure had the market been that some banks began lowering their mortgage rates yesterday and more have cut since the statement was released.

Despite today's OCR cut, the RBNZ's forecast OCR has it sitting at 4% through the March quarter and falling to 3.4% in the June quarter, to 3.2% in the September quarter and ending the year at 3.1%, where it will remain through to the March quarter of 2028.

“The economy needs help,” said Kiwibank chief economist Jarrod Kerr, but add that the main message is the lower OCR track. “The RBNZ are signalling more cuts, sooner.”

That OCR track is somewhat lower than that published in November last year, even though RBNZ now expects some what higher Consumer Price Index (CPI) inflation through this year.

It expects the annual CPI to be 2.4% in the year ending March, remaining steady at that level in the year ending June and rising to 2.7% in the year ending September.

In November, RBNZ had forecast inflation at 2% in the year ending March, 2.1% in the year ending June and 2.5% in the year ending September.

For calendar 2025, it now expects inflation of 2.5%, a smidge higher than November's 2.4% forecast.

On a quarterly basis, RBNZ now expects 0.8% for the March quarter, up from 0.5% previously, but 0.4% in the June quarter, down from 0.3%.

The central bank says its expects the CPI to be “volatile in the near term due to a lower exchange rate and higher petrol prices.”

RBNZ's quarterly growth forecasts remain at 0.6% for both the March and June quarter this year, drop to 0.5% (from 0.6% previously) in the September quarter and then return to 0.6% in the December quarter and remain at that same quarterly pace through 2026 and the first half of 2027.

The central bank expects unemployment will remain at its 5.2% in this quarter and in the March quarter and to stay a little higher than its previous forecasts through to the end of 2027 when it will have fallen to 4.3%.

Tags: OCR OCR forecasts