RBNZ Has Limited Scope to Cut Cash Rate This Year, OECD Says

-- The Reserve Bank of New Zealand has limited scope to cut interest rates this year and shouldn’t ease policy until it’s sure inflation will return to target, according to the Organisation for Economic Cooperation and Development.“Inflation is likely to be persistent,” the OECD said in its Economic Surveys: New Zealand 2024 report published Monday in Wellington. This “limits the scope for lowering the Official Cash Rate in 2024 and it should remain constant at 5.

“The government should set operating allowances and tax policies that will gradually reduce the fiscal deficit to reach budget balance,” the OECD said. “Any tax cuts should be fully funded by offsetting revenue or expenditure measures.”The Paris-based OECD projects modest economic growth of just 0.8% in the year through December 2024, lifting to 1.9% in 2025.

Said productivity remains substantially below the OECD frontier, partly due to insufficient competition. Market concentration should be addressed through facilitating entry, effective regulations, antitrust enforcement and, as a last resort, break-ups. The foreign direct investment regime — “one of the most restrictive in the OECD” — should be eased

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Bloomberg Reserve Bank Of New Zealand RBNZ Headline Inflation Fiscal Deficit Target Range

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