The Reserve Bank of New Zealand will notch up a year of unchanged monetary policy when it next considers the official cash rate.

All forecasts are for the Reserve Bank (RBNZ) to hold the OCR at 5.5% tomorrow.

After last hiking in May 2023, it has held rates at each meeting since, sitting in “watch, wait and worry” mode, according to governor Adrian Orr, hoping to see headline inflation back inside its target band.

Consumers price index (CPI) inflation was measured at 6.7% at the start of last year, and has dropped in every quarter to now sit at 4%.

While the direction of travel for CPI inflation was good, the domestic component concerned many economists, including Viv Hall, a former RBNZ director and an Emeritus Professor at Victoria University of Wellington.

“We’re making sound progress on getting inflation down but the non-tradeables component is sticky and it’s the most important for the bank setting the OCR,” he told AAP.

Non-tradeable inflation was last measured at 5.8% in the March quarter, at 5.9% in the December 2023 quarter, and at 6.3% and 6.6% in the quarters prior.

In short: it isn’t coming down anywhere near fast enough to warrant the RBNZ cutting the OCR.

The RBNZ’s own tracking tips a first cut only in the second half of 2025, with many banks slightly earlier. Both ANZ and Westpac were forecasting early 2025 for a first movement down.

The key piece of data that might be useful for a cut, CPI, was due out next week, making this week’s RBNZ review “unfortunately timed” according to Hall.

Hall was tipping an OCR with a five in front of it at this time in 2025 — but said that would set the Kiwi economy for a strong rally.

“In GDP terms, we are continuing along just above or below zero (each quarter),” Hall said.

“I was around in the early 1990s when we had a similar period of time when GDP was plus or minus zero and that is the price you have to pay to get inflation down.

“In the ’90s, once inflation had been tamed, it was actually a very good and prolonged upswing.”

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