‘Soft-ish landing’: Why rates could be cut quickly

The Reserve Bank of New Zealand has cut the wholesale interest rate at a faster pace than it has hiked throughout history, possibly suggesting how it could approach another move lower this week.

“Usually they go down very fast,” JB Drax Honore chief Asia Pacific strategist Sean Keane told Markets with Madison.

“They hike in 25s [basis points] because they’re cautious, and when they cut, they cut a lot, because they’re worried.”

Keane was with the majority of the market picking a 0.5% cut to the official cash rate (OCR) this week, bringing the wholesale interest rate down to 4.25%, below Australia’s 4.35%.

He believed there was a case for a larger 0.75% cut.

“What’s clear to me though is that the New Zealand economy needs lower interest rates.

“GDP is reasonable, but not good. On a per capita basis, it’s terrible.

“But it’s a soft-ish landing.”

Watch Sean Keane explain the history of rate cuts and how soon they could provide economic relief, in today’s episode of Markets with Madison above.

Get investment insights from executives and experts on Markets with Madison every Monday and Friday here on the NZ Herald, on YouTube and wherever you get your podcasts.

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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.

Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.