The OCR and the year ahead

Congratulations New Zealand, we’ve finally done it!

nsights with InFinance by Brian Coogan

 We’ve shaved 3.25% off the Official Cash Rate ( OCR ) in nine steps down from 5.5% 15 months ago to settle at 2.25% on November 26, to take us through to the next announcement on February 18.

The big question on everyone’s lips is ‘where to from here’?

While banks, having since reduced mortgage interest rates and then some slight raising more recently due to wholesale markets volatility might suggest we’ve found the bottom, the general consensus being  we’ve done all the major cuts we needed and anything from here is just tweaking, we’ve arrived at our destination … finally!

Cue new Reserve Bank Governor Dr Anna Breman fresh over from Sweden on a five-year tenure as Reserve Bank Governor as of December 1 and the following comments from one of her statements released December 15.

“We continue to see signs that growth is recovering after having stalled in the middle of this year. The labour market is still weak but is expected to recover as demand in the economy strengthens. We remain confident that annual headline consumer price index inflation will decline towards the 2 per cent target mid-point by the middle of next year.”

Dr Breman reiterated that the forward path for the OCR indicates a slight probability of another rate cut in the near term.

“However, if economic conditions evolve as expected the OCR is likely to remain at its current level of 2.25 per cent for some time”.

So, there you have it, basically the interest rates we have now will be it or thereabouts for the foreseeable future which brings us in line with where they’ve mostly sat for the last 60 years, apart from economic events like the crazy 80’s.

While it’s been a long time coming since its peak in May ‘23, the worst is behind us and considering the 2008 GFC resulted in the OCR hitting 8.25% we’ve fared better this time around, it’s been a lot worse.
 

So brighter days ahead, here’s to an outstanding 2026 and wishing you a happy and safe Christmas and New Year.

For more in depth analysis on the above go to www.infinance.co.nz/insights  and we will continue to post columns online while the paper takes a well-earned break over the holiday period. Catch you in the New Year.

“The most important thing to do if you find yourself in a hole is to stop digging” – Warren Buffett