OCR Predictions. Where are we headed

ANZ economists have revised their Official Cash Rate (OCR) forecast, now anticipating a deeper and more prolonged easing cycle by the Reserve Bank of New Zealand (RBNZ). They project the OCR will fall to 2.5% by the end of 2025, a significant adjustment from their earlier expectation of a 3% floor. 

Updated OCR Forecast

• Current OCR: 3.5%

• Projected Cuts: 25 basis points in August and October

• Terminal Rate: 2.5% by late 2025

This outlook suggests a more aggressive easing path than previously anticipated, reflecting concerns over the pace of economic recovery.

Economic Context

ANZ’s adjustment stems from recent data indicating a “stop-start” recovery pattern, with persistent global trade uncertainties and a subdued growth outlook.  These factors are expected to dampen investment and broader risk-taking, necessitating additional monetary policy support to maintain the recovery trajectory.

Key economic indicators influencing this forecast include:

• GDP Growth: Revised down to 1% for 2025 from 1.3%

• Housing Market: Growth forecast trimmed to 4.5% for 2025 from 6%

• Unemployment: Expected to peak at 5.3% in 2025 before easing to 4.6% by 2026

Implications

A lower OCR is intended to stimulate borrowing and investment, providing a boost to economic activity. However, it may also lead to a weaker New Zealand dollar, impacting import costs and savings returns. The RBNZ will need to balance these outcomes to ensure a sustainable economic path forward.

The upcoming Monetary Policy Statement from the RBNZ will be closely watched for alignment with ANZ’s revised outlook and further insights into the central bank’s policy direction.