The Reserve Bank is expected to cut the Official Cash Rate today, but how deeply it will cut remains to be seen.
Markets are pricing in the cut as a certainty, but the debate is now on how big it will be.
The ANZ and BNZ teams are picking a
Why the Reserve Bank may opt for a larger OCR cut to tackle inflation - The Front Page
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NZ Herald business editor at large Liam Dann told The Front Page that he’d like to see the bank front-end it and go with the larger cut.
“We’ve had this rough patch with food and electricity prices, and that has pushed inflation up. So, the Reserve Bank has this single mandate on inflation now. The coalition Government changed that from unemployment inflation to just inflation.
“So, when people look at the decisions the Reserve Bank is making and they look at how bad retail is downtown and all that sort of stuff, that’s really not what’s driving them. Their core driver for all of their decision-making is keeping inflation between 1% and 3%,” he said.
The consumer price index (CPI) increased 2.7% in the 12 months to the June 2025 quarter.
It means the official inflation rate is at its highest point in the last year. The next update is set for October 20.
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Meanwhile, the risk of holding back on an OCR drop was the realisation that the downturn New Zealand is in is deeper than thought, Dann said.
“If an economy loses too much steam, it’s very hard to get it rolling again. Some people are arguing that we’re already there. But we saw this big fall in GDP growth in the second quarter. So, we had a couple of quarters, the last of last year and the first of this year, where we had growth, and we thought, ‘Yay, the recovery’s happening.’
“Well, that is what’s supposed to happen, and it just absolutely fell off a cliff in the second quarter. Some people, including the Government, have pointed to the US tariff policy spooking everyone or hitting our economy,” he said.
Listen to the full episode to hear more about:
- The impact the OCR might have on borrowers and mortgages
- Leadership and governance issues
- Outgoing governor Adrian Orr’s restraint of trade payout
- The broader economic outlook and comparisons to the 2008 GFC
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
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