PHOTO: Adrian Orr is the current Governor of the Reserve Bank of New Zealand. FILE
As we enter 2025, the Reserve Bank of New Zealand (RBNZ) is anticipated to continue adjusting the Official Cash Rate (OCR) in response to evolving economic conditions. Recent decisions have already set the stage for further changes in the coming year.
Currently, the Official Cash Rate (OCR) in New Zealand is 4.25%. The Reserve Bank of New Zealand (RBNZ) began cutting the OCR in August 2023, ending a period of rapid monetary policy tightening. The OCR had been raised from 0.25% in October 2021 to 5.50%.
Recent OCR Adjustments
In November 2024, the RBNZ reduced the OCR by 50 basis points to 4.25%, marking the third cut in four months. This decision was influenced by inflation rates aligning with the bank’s target range of 1% to 3%. RBNZ Governor Adrian Orr indicated the possibility of additional easing, including a potential further 50 basis point cut in February 2025.
Projections for 2025
Analysts and financial institutions have provided various forecasts regarding the OCR trajectory for 2025:
- Kiwibank: Predicts the OCR will decrease to approximately 3% by the end of 2025, suggesting a cumulative reduction of 125 basis points throughout the year.
- Opes Partners: Foresees the OCR reaching 3.75% by the end of 2025, indicating a further 1.5% drop from current levels.
- Trade Me Property: Expects the OCR to decline to between 2.75% and 3.5% over the next 12 to 18 months, which could exert downward pressure on interest rates.
Implications for Borrowers and Investors
As the OCR decreases, borrowing costs are likely to fall, potentially leading to lower mortgage rates. Squirrel, a financial advisory firm, notes that with the RBNZ targeting a neutral OCR around 3%, mortgage rates could adjust accordingly, potentially falling to between 4.5% and 5%.
Key OCR Announcement Dates for 2025
The RBNZ has scheduled several key dates for OCR announcements in 2025:
- 19th February: Monetary Policy Statement & OCR
- 9th April: Monetary Policy Review & OCR
- 28th May: Monetary Policy Statement & OCR
- 9th July: Monetary Policy Review & OCR
- 20th August: Monetary Policy Statement & OCR
- 8th October: Monetary Policy Review & OCR
- 26th November: Monetary Policy Statement & OCR
These dates will be crucial for monitoring the RBNZ’s monetary policy direction and its impact on the economy.
Conclusion
The RBNZ’s monetary policy decisions in 2025 will be pivotal in shaping New Zealand’s economic landscape. Stakeholders, including borrowers, investors, and policymakers, should stay informed about these developments to make strategic decisions in a dynamic financial environment.