Economists are rapidly revising their outlook for interest rates as the extent of economic damage from coronavirus becomes clearer.
ANZ economists now expect the Reserve Bank of New Zealand to cut the OCR 50 basis points in March and a further 25 basis points in May, taking the OCR to just 0.25 per cent.
Westpac has changed its call and now expects a cut of 25 basis points in March - although it expects rates to stay on hold at 0.75 per cent from there.
"A marked global slowdown is guaranteed, due to both demand and supply disruptions. Our forecasts assume New Zealand GDP stalls in the first half of the year, with a gradual recovery from there," said ANZ chief economist Sharon Zollner.
"But although New Zealand is better placed than many countries to weather this shock, we see clear risks of a larger slowdown or even recession."
BNZ chief economist Stephen Toplis was more cautious, although he acknowledged the chances of rate cuts has risen.
"We believe the Bank will be reluctant to reduce its cash rate further at this stage," he said.
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"If it is to feel pressured into a cut later this month, we would lean toward a 25-point move rather than 50."
Money markets were now pricing about one and a half rate cuts (-38bps) at the March 25 OCR review, he said.
"What's more, the markets now envisage just over two reductions in the cash rate – to (below) 0.5 per cent– by the 13 May Monetary Policy Statement," he said.
But it was important to factor in comments from RBNZ Assistant Governor Christian Hawkesby, who had pushed back at the idea of any OCR easing, Toplis said.
He noted that Hawkesby said at the time: "Monetary policy is not the right tool to be using and there are a whole lot of different ways the broader NZ Government could provide assistance".
In the past week economists have been forced to reassess the duration and depth of the coronavirus downturn.
Stock markets have slumped into correction territory - down 10 per cent - and commodities like oil have also fallen sharply.
There are also growing concerns about a supply-side shock as the world's businesses cope with shortfalls of parts and equipment coming out of Chinese factories.
"When the facts change, we change our minds. And the facts are changing fast," ANZ's Zollner said.
"The economic impact of the Covid-19 outbreak is now looking impossible for RBNZ to look through, as it becomes clear it won't be brief."
ANZ downgraded its growth forecasts last week but already, these forecasts were looking out of date, she said.
"Given the spread of the virus since then, the presence of the virus in New Zealand, established community outbreaks in the US, and the violent sell-off in global financial markets ... a sharper global slowdown is on the cards."
ASB economists are currently revising their OCR outlook.
Wider Government policy should be "the first cab off the rank", said senior economist Jane Turner.
"Government has a vital role to play in co-ordinating the nationwide response and providing targeted support to impacted sectors," she said.
"Monetary policy can still help, and it is becoming increasingly likely the OCR will move lower if the impact of demand looks to be long lasting."
She noted the US Federal Reserve and Reserve Bank of Australia both have interest rate decisions that are due before the RBNZ (the RBA is due tomorrow).
"It is imperative that the RBNZ (and other central banks) remains measured, given that they have an important role to maintain confidence," Turner said.