Reserve Bank expected to cut Official Cash Rate to 2.25% this week

Monday, 24 November 2025

Economists expect the Reserve Bank will follow through on its previous intentions and cut the Official Cash Rate by 25 basis points when it releases its final monetary policy statement of the year on Wednesday.

But doubts appear to be growing that a cut is justified.

ANZ chief economist Sharon Zollner said she suspected the Reserve Bank’s modelling would not dictate that a cut this week was necessary.

But she said that if the bank didn’t deliver the expected easing, the market reaction could be “violent” and put upward pressure on interest rates, potentially putting the nascent recovery at risk.

There were now clear signs the economy was responding to easier monetary conditions, she said, tipping the Reserve Bank would be non-committal about the likelihood of further cuts next year.

“We currently see the risks tilted towards the Reserve Bank sounding less dovish than anticipated.”

Infometrics chief forecaster Gareth Kiernan has warned there is a risk of the central bank taking the easing cycle too far.

Last month, he accused the bank of being “impatient” waiting for economic growth to show through and voiced concern that could lead to higher inflation and mortgage rates heading back up over 6% down the track if it had to correct any over-steer.

BNZ research head Stephen Toplis described the hurdle for a further cut early next year as significant.

“We remain in the camp that says the balance of risk to economic activity is downside, but we can’t condone significantly more easing,” Toplis said.

“Inflationary pressures are not dead, the impact of past cuts still has some way to play out, the global central banking environment seems to be turning more hawkish, current rate settings are already stimulatory, and very few folk are saying that the level of interest rates is problematic suggesting that even lower rates may have minimal impact on the factors that are constraining growth anyway.”

ASB chief economist Nick Tuffley is more dovish, noting financial markets are pricing-in about a 50% chance of two rate cuts in the current cycle, which would take the OCR down to 2%.

The Reserve Bank would “leave the door wide open for further easing if it is needed”, he expected.

Kiwibank chief economist Jarrod Kerr also believed the central bank was still playing catch-up.

“Hopefully 2.25% is the bottom, but maybe not,” he said.

The monetary policy statement will be the final one presided over by acting governor Christian Hawkesby, who will hand over the reins next week to the central bank’s new governor for the next five years, Swedish economist Anna Breman.

In a rare move, the bank’s top brass will be travelling to its Auckland office to field questions on its statement on the day of its release, following an asbestos scare at its head office in the capital.