End to RBNZ tightening cycle creeps closer
The Reserve bank (RBNZ) is still engineering a policy-induced recession. While it’s going to hurt some households more than others, economists hope the slowdown will turn the tide on domestic inflation, and set the broader economy on a more sustainable path over the longer run.
Westpac senior economist Michael Gordon expects an OCR rise to 5 per cent on Wednesday to remain there for the following year.
As inflation pressures recede, Gordon says, Westpac’s economics team sees scope for an extended series of rate cuts in 2024 and 2025, by more than the market is factoring in.
“The RBNZ’s response to inflation is now well advanced and has finally reached a level that the RBNZ considers to be contractionary. There are some early signs that this is having the desired effect, and that demand in the economy is starting to cool off.”
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