Economists see less need for OCR cuts

by Roxanne Libatique13 Dec 2019

After many speculations that the official cash rate (OCR) would be slashed further, economists finally saw less need for more cuts.

Kiwibank economists believe that spending more on infrastructure would take some of the heat off the Reserve Bank of New Zealand (RBNZ) to stimulate the economy through further OCR cuts – with chief economist Jarrod Kerr and senior economist Jeremy Couchman seeing the need for only one cut next year.

Both economists revised their outlook following more government spending and RBNZ’s bank capital announcement. ANZ economists also revised their OCR outlook following the bank capital announcement and now only see one more cut.

On the other hand, BNZ head of research Stephen Toplis doesn’t see any further OCR cuts at all.

“While you can’t say categorically that it [more infrastructure spending] will make the RBNZ more hawkish, you can say that it won’t in any way shape or form encourage it to cut rates,” he said, as reported by

Read more: Reserve Bank defends OCR decision

RBNZ shocked economists last month when it decided to keep the OCR at current level. Yuong Ha, chief economist at RBNZ, explained that they almost pushed through with cutting the OCR again but they thought that going through with it “would have been well choreographed, and you don't know what market pricing would have done.”

“The currency might not have reacted at all, and we have seen that in the past where the central bank is the last to act,” Ha previously told

He also noted that mortgage rates are down between 50bp and 100bp since the beginning of the year, and the NZ dollar is down about 5% “so that is unambiguously stimulatory.”

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