KiwiBank has shifted its monetary policy call, now forecasting a larger 50 basis point cut by the Reserve Bank of New Zealand in October, followed by a further 25bp reduction in November. That would take the cash rate to 2.25% by year-end, with economists citing the economy’s failure to recover from last year’s severe recession.
- “We now expect a 50bps cut in October, followed by a 25bps cut in November,” the bank said, adding that the data made it “crystal clear that the Kiwi economy is not recovering.”
- KiwiBank said further easing to 2% may be needed, depending on how activity evolves over summer, estimating a 50/50 chance of additional support.
The bank pointed to broad-based weakness in the latest GDP release, with 10 of 16 industries contracting, calling it “simply not what you’d expect a year after the severe recession.” It argued the RBNZ should keep its “foot firmly on the accelerator” to bolster growth.
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KiwiBank’s call highlights rising pressure on the RBNZ to act quickly as growth falters. A larger October move and follow-up November cut would mark a sharper easing path, with risks of further support to 2% if weakness persists.
This article was written by Eamonn Sheridan at investinglive.com.