Will New Zealand's new monetary policy committee cut rates, or will it hold?

At 2pm the Reserve Bank makes a highly anticipated call.

We haven't had a cut since November 2016.

Markets are split, as are economists with Westpac Bank saying the decision is "on a knife edge" and ASB Bank calling it "finely balanced."

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Market pricing points to a 50 per cent chance of 25 basis-point rate cut, to 1.5 per cent.

Markets are split, as are economists with Westpac Bank saying the decision is "on a knife edge" and ASB Bank calling it "finely balanced."

Market pricing points to a 50 per cent chance of 25 basis-point rate cut to 1.5 per cent.

Reserve Bank governor Adrian Orr surprised markets in March when he said "given the weaker global economic outlook and reduced momentum in domestic spending, the more likely direction of our next official cash rate move is down."

Since then, inflation has been lower than expected and while the unemployment rate dipped in the first quarter the underlying data was weak.

Today's decision is the first to be made by a new committee.

The new structure emerged after phase one of a review of the Reserve Bank Act to modernise the policy frameworks, governance, and accountability arrangements announced by the Labour-led government shortly after taking office.

The new committee, which includes four internal members and three external members - removes sole interest rate decision-making by the governor.

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Capital Economics says a recent string of soft economic data will be enough for the Reserve Bank of New Zealand to cut.

"Since the RBNZ shifted to an easing bias in March the economic data have remained generally subdued, supporting the case for a rate cut. And we suspect that a rising unemployment rate and subdued underlying inflation in 2019 will force the bank to cut rates again in November."

It doesn't anticipate the switch to a committee will have much impact.

"We don't expect the new committee members or structure to make any significant differences to the future direction of monetary policy.

But the release of the meeting minutes and the non-attributed record of any votes taken should make the RBNZ's position a little more transparent."Westpac Bank economists say they marginally favour a cut.

"We think the odds of an OCR cut are about 55 per cent, versus a 45 per cent chance of no change."

Regardless of whether it cuts or holds, Westpac expects the bank's forecasts to show the official cash rate reaching 1.4 per cent before rising again.

ANZ Bank chief economist Sharon Zollner expects the central bank to leave the official cash rate at 1.75 per cent but "we expect a dovish tone, in line with the March OCR review, and a downward-sloping OCR forecast track implying around 35 basis points of cuts by the end of the year.

"She notes that domestic data has confirmed the "economy is cooling but hardly freezing up."

ANZ expects a rate cut in August, with two more to follow. "In our view, the Monetary Policy Committee will be convinced by August that an OCR cut is necessary to be able to credibly forecast inflation sustainably returning to the midpoint of the target band over the medium term," it says.

ASB Bank's chief economist Nick Tuffley said "on balance, we think the new Monetary Policy Committee will have seen enough evidence to justify acting and will deliver a 25 basis-point OCR cut in May, followed by a further 25 basis-point cut in August."

He also expects the published interest rate track to signal at least one more rate cut this year.

- Business Desk