PHOTO: ROBYN EDIE/STUFF With an official cash rate of 1 per cent, Reserve Bank governor Adrian Orr doesn’t have a lot more ammunition to deploy.
A bigger-than-expected cut to the official cash rate this week does not signal a recession immediately around the corner, but no one can afford to be complacent about “frightening” economic conditions, economists say.
The Reserve Bank surprised markets when it cut the official cash rate from 1.5 per cent to 1 per cent. Commentators had predicted it would be cut by half that much, to 1.25 per cent.
Brad Olsen, an economist at Infometrics, who described the move as “taking a chainsaw to the economic outlook” said it was a big step, which highlighted the extent of weakness in the economy and concerns about the international environment.
Another rate cut is predicted by the end of the year.
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