A February rate cut puts neutral in sight

Questions over what is the magic number for neutral. (Image: Getty)

Fri, 24 Jan 2025

Where is the neutral official cash rate? Where is the official cash rate likely to converge to?This is an important issue when considering borrowing costs across the business cycle, not just in a year’s time.The neutral rate is the official cash rate (OCR) at a level that is consistent with no over- or under-utilisation of economic resources and stable inflation. The Reserve Bank of New Zealand (RBNZ) is effectively on holiday, having a siesta, with inflation around 2% and the economy not over- or under-delivering but stable.Neutral...

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