According to Jinshi Data, the Shadow Committee of the Reserve Bank of New Zealand recommended a 50 basis point cut in the official cash rate (OCR) to 4.25% at the monetary policy meeting on Wednesday.
As annual inflation has returned to the target range of 1% to 3%, while the economy remains weak, most members support a cut in the OCR. One member pointed out that there is a three-month gap between the November and February meetings, and a 50 basis point cut this week is appropriate to return the OCR to the neutral rate within the next 12 months.
Most members of the shadow committee believe that the OCR level should be between 3.0% and 4.0% in one year, reflecting that the Fed should continue to lower the OCR when inflation returns to the target range but economic growth is weak. One member pointed out that US trade restrictions may increase and the Fed needs to pay attention to the downside risks of the New Zealand dollar, which may limit the extent of interest rate cuts in the next year.