WELLINGTON, Aug 6 (Reuters) – ANZ Bank said on Tuesday it was now forecasting that New Zealand’s central bank would cut the official cash rate (OCR) three times this year, amidst a “dramatic” escalation in global risks and a weak domestic outlook.
That would take rates to a record low of 0.75% by year-end, even lower than ANZ’s previous forecast of 1%. The OCR is currently at 1.5% after the Reserve Bank of New Zealand (RBNZ) cut rates for the first time in more than two years in May as international risks compounded and domestic growth eased.
“Global risks have escalated dramatically in recent days as Trump imposed further tariffs on China’s imports, and China retaliated by stopping purchases of US agricultural goods,” said Sharon Zollner, chief economist at ANZ in a research note.
She added that New Zealand’s small open economy, which is heavily dependent on trade with China, could be hit by lower exports and business jitters which would see firms holding off on investing and employing if the yuan weakened significantly as a result of its trade dispute with the United States.
The RBNZ is set to announce its next rates decision on Wednesday with most economists, including ANZ, predicting the bank will slash rates by 25 basis points to 1.25%. (Reporting by Charlotte Greenfield; Editing by Sandra Maler)