Economists at New Zealand's largest bank are picking the official cash rate will be cut next year on the back a weakening global outlook and new bank capital rules.

"We are now forecasting a 25 basis point cut in the Official Cash Rate in November 2019, with a further 50 basis points of cuts to come over 2020, says ANZ chief economist Sharon Zollner.

This represents a big shift in outlook for the ANZ economists which had previously forecast rates to stay on hold into 2020.

It also puts them increasingly at odds with other bank economists most of whom are forecasting the next rate move will be up - after staying on hold into 2020.


The Reserve Bank itself has kept its options open for the next rate move - but currently has forecasts which imply the next move would be a hike in the third quarter of 2020.

The official cash rate is currently at 1.75 per cent.

Zollner cites several reasons for the fresh call.

"There are multiple drivers of this changed call but in short they come down to a weaker outlook for medium-term inflation, risks around global growth and liquidity, and the proposed capital changes for banks," she said.

Today's sluggish GDP data for the third quarter was not a major influence.

"Our view of the New Zealand growth outlook has not materially changed," she said.

The Reserve Bank's proposed changes - requiring banks to hold more capital - would impact both the price and the availability of credit to the broader economy, Zollner said.

"It therefore implies a lower long-run neutral OCR, but also an even lower OCR over the transition period, while banks are building their buffers."


There was unlikely to be a smooth path for interest rates between now and an eventual OCR cut, she said.

"Market pricing is likely to continue to wax and wane, and we would not be surprised to see the data cause some volatility in the interim, especially given the recent increase in business confidence and potential upside to fourth-quarter GDP."

The economy was still performing well, she said.

"But over time, we expect that it will become clear that the economy needs more of a leg up from monetary stimulus if inflation is to lift sustainably to target."