‘I'm pro-growth’: Why Kiwibank’s Jarrod Kerr opposes an OCR rise

Wednesday, 8 July 2026

If the Reserve Bank decides to raise the Official Cash Rate to 2.5% today, it will face few fiercer critics than Kiwibank chief economist Jarrod Kerr.

The Auckland-born, Massey-trained economist is far from alone in arguing the central bank should hold off a rate rise for now.

Westpac chief economist Kelly Eckhold is in the same camp and ASB’s forecasting team has also urged the Reserve Bank not to “jump at shadows” on inflation.

Financial markets were on Tuesday pricing in about a 64% chance of a 25 basis point rate rise, having implied last month that was effectively a done deal.

Read more:

• Reserve Bank rate rise appears more likely than not as calls grow for ‘normalisation’

• Kiwibank tries to shoot down ANZ’s take on what the Reserve will do

• Shifting sands under Reserve Bank ahead of next OCR decision

But Kerr has been the most consistently dovish bank economist this year.

Prior to the Reserve Bank’s last monetary policy statement in May, he had been forecasting it would delay any rate rises until next year.

“Saying I'm a dove is fair, but I would actually say I’m ‘pro-growth’,” he remarks.

And he still argues that keeping the OCR on hold until next year would be the best course of action, although he now expects two rate rises before Christmas.

While ANZ chief economist Sharron Zollner suggests it is sensible to “get a hike under the belt” and BNZ research head Stephen Toplis agrees it’s time to take the foot off the accelerator, Kerr argues that the inflation threat from the Middle East crisis is receding and the central bank can afford to give the economy more time to recover.

There’s a difference between what he thinks the bank “should do, which is just to leave things alone” and what he now thinks it will do, which is to raise the OCR in September or after the November election.

It would probably be fair to say Kerr has flown with the doves for most of his eight years in the hot seat at Kiwibank — but not all the time.

He agrees he was more dovish than most in expecting rate cuts in 2018 and 2019 when he moved into the role.

However, he was relatively quick to call for aggressive rate rises when inflation started to take off in 2021, before arguing for an earlier end to monetary tightening the following year and calling more strongly than most for rate cuts after that.

Kerr's recommendations have also frequently been more dovish than his predictions.

One reason for his perspective may be that he has put more emphasis than most during his forecasting career on the difference between demand-led and supply-driven inflation, and the case for different policy responses to each.

The current higher rate of inflation is “a classic supply shock”, he says.

“We haven’t seen an uplift in demand, in fact we have seen ‘demand destruction’. We’ve seen it in the lower quartile — the lower income households. They get hit the hardest because petrol is a much larger proportion of their consumption.”

Those comments hint at the reality that monetary policy discussions can be more than a purely technical debate.

While some economists coolly argue tightening monetary policy now would ultimately help those who are struggling by staving off the risk of an even tougher monetary response later, Kerr has appeared more sensitive to their immediate impact.

“I put a lot more weight on the pain that households are already feeling, and inflicting more pain is not the answer, in my view,” he says.

The current discussions are taking place against the backdrop of “a cost-of-living crisis” that has lasted for three years, he says.

“The price of fuel at the moment has dropped back, but it's still higher than what it was. Food prices, electricity prices, council rates, insurance premiums — households have just been hit by wave after wave and hitting them with higher interest rates is not going to help, it's going to hurt.”

Still, whether or not his prediction for a hold proves correct today, Kerr has moved towards the consensus by revising his forecasts for later this year and he points out that hawks have been moderating their stance, narrowing the differences.

Kiwibank was once standing on its own calling for a ‘hold’ and “now we've got more commentators joining us”, he says.

“I was talking to someone who we laugh on the trading floor is a massive hawk. I asked him where he expected the cash rate to be in a year’s time and he said 3.25%. And I'm at 3%, so in a year's time, we're pretty much bang on.

“All we are saying is — for God's sake — let the economy recover a bit more before we raise rates.”