RBNZ to cut rates by another half-point on Nov. 27, slow pace in 2025
reuters://realtime/verb=Open/url=cpurl%3A%2F%2Fapps.cp.%2FApps%2Fcb-polls%3FRIC%3DNZINTR%253DECI poll data
Reuters poll graphic on comparison between Reserve Bank of New Zealand, Reserve Bank of Australia and U.S. Federal Reserve rate outlook: https://tmsnrt.rs/3CHlnCs
Reuters poll graphic on Reserve Bank of New Zealand policy rate forecast: https://tmsnrt.rs/3CEz44T
By Devayani Sathyan
BENGALURU, Nov 22 (Reuters) -The Reserve Bank of New Zealand will lower interest rates by 50 basis points on Wednesday to support the economy, according to economists in a Reuters poll who predicted the central bank would cut rates steadily next year.
Thanks to the central bank's vigorous post-pandemic rate hiking cycle, inflation in New Zealand fell to 2.2% last quarter, within the RBNZ's target range of 1-3% for the first time in more than three years.
However, the RBNZ's success in controlling price rises has come at a cost to the economy, with activity slowing considerably to the point of contraction, suggesting a rate cut would be a welcome move to revive growth.
With the RBNZ not expected to meet post-next week until February, 90% of economists, 27 of 30, in a Nov. 18-21 Reuters poll forecast the central bank to cut interest rates NZINTR=ECI by 50 basis points to 4.25% on Wednesday.
Of the remaining three, two forecast a smaller 25 basis points rate cut while one saw a 75 basis point reduction.
The expected cut would position the RBNZ, which has already eased rates by 75 basis points cumulatively in the past two meetings, as more dovish than the U.S. Federal Reserve, and in contrast to the Reserve Bank of Australia, which is yet to begin its easing cycle.
"It's sort of steady as she goes. The economy is growing sluggishly at best, and the labour market is pretty weak. So that sets up the RBNZ next week to deliver another 50 basis point cut, the same as we saw in October," said Shannon Nicoll, associate economist at Moody's Analytics.
"The pace the RBNZ is working on right now is appropriate for where the New Zealand economy is at, regardless of what it looks like overseas...looking out to next year the central bank will take a more measured 25 basis point per meeting stance to slowly ease rates until they hit the neutral rate of around 3%."
The largest banks in the country, ANZ, ASB, Kiwibank, Bank of New Zealand, and Westpac, expected a 50-basis point cut on Wednesday. Interest rate futures are pricing a roughly 80% chance of that happening. 0#RBNZWATCH
Over 60% of respondents who had a longer-term view, 16 of 26, forecast a quarter-point cut in February, taking rates to 4.00%. Of the remaining 10, eight saw a half-point reduction to 3.75% while one each expected rates at 4.25% or 4.50%.
Median forecasts showed the cash rate will come down to 3.25% by end-September. That would mean a total of 225 basis points worth of rate cuts in around a year.
"I don't think they're panicking at all, but it is fair to say they did a little too much. They would say that they did what they needed to get inflation back to 2%, but I'd argue we would have got back to 2% with a cash rate that peaked at 5.00% rather than 5.50%. They've caused a bit too much of a recession," said Jarrod Kerr, chief economist at Kiwibank.
"Next year it will get a little more complicated as they get closer to a neutral rate...our best guess is we get to 3% pretty quickly and then they pause for a while."
(Other stories from the Reuters global economic poll)
Comparison between Reserve Bank of New Zealand, Reserve Bank of Australia and U.S. Federal Reserve rate outlook https://tmsnrt.rs/3CHlnCs
Reserve Bank of New Zealand policy rate forecast https://tmsnrt.rs/3CEz44T
Reporting by Devayani Sathyan; Polling by Veronica Khongwir and Rahul Trivedi
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