Before the release, BNZ was the most pessimistic of the banks with its forecast of a 0.5% decline in GDP, but it is more optimistic about the current September quarter.
“There is a heck of a lot of money coming through the external sector, car registrations are pretty good and card transactions are picking up,” Steel said.
While there was an increased chance of a 50bp cut next month, Steel said much would depend on the data between now and the Reserve Bank’s OCR review on October 8.
However, BNZ economists are sticking with their central view of two more 25bp rate cuts in October and November.
Rabobank, in its analysis, said the economic conversation in New Zealand had shifted from a focus on fighting inflation to supporting growth and employment.
The Reserve Bank has already cut the OCR by a cumulative 250bps since August last year, the bank noted.
Rabobank has forecast cuts of 50bps in October and 25bps in November to take the OCR to 2.25%.
“We see potential for a further 25bp cut in Q1 2026 if growth does not stabilise close to trend,” Rabobank said.
Rabobank expects further falls in one to five-year bond yields and swap rates, but for 10-year bond yields to remain relatively elevated.
Westpac and ASB also expect a 50bp cut in October, followed by a 25bp cut in November.
Kiwibank has been calling for a 2.5% OCR for over two years and has made a case for a 50bp cut next month.
ANZ economists are taking an open-minded approach.
“Not cutting 50bps in October doesn’t rule out a 50bp cut in November and/or ultimately cutting the OCR lower than 2.5%,” the bank said.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.