RBNZ urged to lower OCR to counter oil price shock recession

He says the standard concern is that lowering the OCR will add fuel to inflation but that relies on households having spare money to spend and businesses having the pricing power to pass costs on and neither is true right now.

“Some businesses will have to pass on costs, but consumers wallets are already squeezed by the cost of living crisis and burdened by higher fuel costs. Consumer demand is already soft, the economy is simmering, not running hot and it's now cooling again.”

Trass has submitted a paper to RBNZ and Treasury with reasoning for a 0.25% cut to 2% tomorrow.

He says the question is not whether oil prices are inflationary because they are temporarily, but whether the OCR should be held or raised to fight them.