Countering that view are the risks of rising inflation, which is nearing the top of the RBNZ\u2019s target band at 2.7%.<\/p>\n
The Reserve Bank now has a single mandate to focus solely on inflation targeting.<\/p>\n
ANZ chief economist Sharon Zollner and her team are still picking a 25-basis-point (bps) cut.<\/p>\n
\u201cWe think the deciding factor will be strategy. A 25-basis-point cut with plenty of dovish messaging around it reduces the risk of needing to change direction abruptly down the track, and it leaves maximum options open.\u201d<\/p>\n
The trade-off against a deeper cut \u2013 that monetary conditions would not be quite so easy over the next six weeks \u2013 would likely be judged acceptable, she said.<\/p>\n
Westpac economists argue the RBNZ shouldn\u2019t wait and are picking 50 basis points.<\/p>\n
\u201cIn our view, there doesn\u2019t seem to be a good reason to delay a move to 2.5%,\u201d Westpac chief economist Kelly Eckhold said.<\/p>\n
\u201cQuickly moving the OCR to a stimulatory level will boost confidence and activity before the important Christmas and summer trading period.\u201d<\/p>\n
It would also reduce the likelihood that even further monetary policy support is required in the new year, he said.<\/p>\n
The Kiwibank economics team suggested the RBNZ should cut by 50 basis points and also signal another 25-point cut in November.<\/p>\n
Anything less would see interest rates head higher, given it would disappoint markets, they said.<\/p>\n
\u201cUnhelpful. And the opposite of what the economy needs.\u201d<\/p>\n
The current cash rate of 3% was not stimulatory, and was not encouraging excessive behaviour or inflation, they said.<\/p>\n
Kiwibank sees a 50% chance that another 25bps cut will be needed in February, taking the OCR to 2%.<\/p>\n
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.<\/p>\n