The House View: A 0.25% OCR cut coming tomorrow

Signalling both the significant spare capacity in the economy right now and its readiness to provide further support should recovery remain elusive, we’re expecting the RBNZ to deliver a further 0.25% cut to the OCR tomorrow.

While some may argue for a stronger stimulus (0.50% cut) to jumpstart growth, given the RBNZ’s singular inflation mandate, we’re advocating for a more measured, data-dependent approach – particularly since we’re heading into stimulatory territory, below the neutral 3% mark, without having seen the full effect of prior cuts as they filter through the mortgage market. With around a quarter of households due to refix mortgages at much lower rates within the next three months, and more than 40% within the next six, we believe we’ll begin to see a modest recovery in household spending.

Tomorrow won’t just be the penultimate OCR announcement of the year – it will also be the penultimate policy move under Acting Governor Christian Hawksby. By the time Dr Anna Breman delivers her first Monetary Policy Statement in February 2026, we expect the easing cycle to be over, with policy having shifted to a ‘wait-and-see’ stance – monitoring the speed of the recovery as well as the build-up of inflationary pressures and inflation expectations in the economy.

Post-easing, we don’t anticipate seeing much movement in the OCR through 2026. In fact, we think the next hiking cycle may likely emerge in early to mid-2027, although of course the markets will begin pricing this well in advance.