7 Sep 2015

RBNZ expected to cut OCR to 2.75%

10:22 am on 7 September 2015

The Reserve Bank is expected to cut the benchmark interest rate for the third successive time on Thursday.

A Reuters news agency poll has all 13 economists polled picking the central bank will lower the Official Cash Rate (OCR) from three percent to 2.75 percent, driven by weaker dairy prices, low inflation and waning business and consumer confidence.

Reserve Bank

Photo: RNZ

Some analysts estimate the economy may slow to between 1 percent and 2 percent this year, raising the risk the economy may stall.

A director at Harbour Asset Management, Christian Hawkesby, said further rate cuts were possible.

"The risks are tilted towards them having to deliver more interest rates cuts than they are willing to admit to at this stage," Mr Hawkesby said.

"The proof will be in the pudding of the data, and if the data continues to moderate as we suspect, the Reserve Bank may eventually come around to that view that the OCR does have to go to 2.5 percent and below."

Mr Hawkesby said the Reserve Bank was likely to be interested in domestically generated inflation, which was more closely tied to the health of the local economy.