Economists split on RBNZ OCR cut: How much will the Reserve Bank lower rates in February?

Debate among economists is starting to emerge on how much the RBNZ will cut the OCR at its next review on 19 February.

The major banks’ economists are mainly picking 0.50%. This is the number the RBNZ predicted it will cut by at its last meeting last year, but former BNZ economist Tony Alexander says it could now be as little as 0.25%.

He bases this projection on two issues – underlying business pricing pressures and monetary policy easings in Australia and the US.
Alexander says the need for New Zealand businesses to rebuild margins means that as the economy improves slowly through 2025, they will raise prices when they can.

Of most interest was December’s ANZ Business Outlook Survey showing the net proportion of businesses planning to raise their selling prices a year down the track was not in line with inflation falling back to 2%.  This peaked at 81% early in 2022, started 2024 at 50%, fell to 35% in June then rose from there. In December the reading was 43% from 42% in November.