The experts mostly see the OCR at 2.25%-2.5% in a year's time but have concerns about the possibility of the Reserve Bank over-stimulating the economy.

Most of the New Zealand Economic Research (NZIER) experts watching what the Reserve Bank (RBNZ) will do this week reckon that the Official Cash Rate will be cut by 25 basis points - but most see this as the final cut.

Ahead of Wednesday's OCR decision financial markets have fully priced in another 25 basis point cut, which would  take the OCR to 2.25% from 2.50%. A cut is therefore widely expected.

Before every OCR decision, the NZIER convenes a panel of experts - academics, economists and business people - a 'Shadow Board' who state their views on what the Reserve Bank (RBNZ) should do ahead of every OCR decision.

NZIER senior economist Ting Huang says with the New Zealand economy starting to recover from a low base but with excess capacity remaining, most 'shadow board' members viewed a further small cut in the OCR as justified to support the economy.

"Some other members viewed no further OCR cut beyond the current level, given their view that the RBNZ should be cautious about stimulating the economy at the risk of increasing inflation," she says.

Regarding where the OCR should be in a year, members’ picks centred on an OCR of either 2.25% or 2.50%.

"This reflected the Shadow Board’s broad consensus that little monetary policy easing will be required beyond November, but there is some disagreement over the level of terminal OCR," Huang said.

"One member pointed out that the real question is more about how long the OCR should remain at stimulatory levels. Another member stressed that the RBNZ should be cautious about any near-term changes in the OCR, given that the current real OCR is at or below 0% and inflation in several closely-related countries is increasing. Overall, the Shadow Board’s view is broadly in line with our OCR outlook for the coming year."

Some mixed views around the board

In terms of some of the individual views of Shadow Board members, BNZ head of research Stephen Toplis noted the end of the easing cycle is near. "Central banks have a proclivity to overshoot at cyclical turning points by focusing too much on current data. Hopefully, this won’t be so this time around," he said.

Viv Hall from Victoria University of Wellington was actually in favour of not cutting this week. "The OCR cuts to date continue to provide expansionary effects and have probably done as much as monetary policy can prudently do to stimulate the real economy without running the risk of overstimulating future CPI and house price inflation. Therefore, it is time to pause any further OCR cuts."

Dennis Wesselbaum of the University of Otago also wanted a pause this week, saying "there is no case for further stimulation". He said inflation is trending upward (now 3%), and inflation expectations remain elevated. International/trade uncertainty remains high but is trending down. Data from GDPlive suggests that we are at the low point of the cycle. Looking at the data, the lagged effects of many earlier cuts are still working through the economy (with many mortgages resetting during the next months).

However, John Pask, economist at BusinessNZ, said "on balance", there is arguably justification for a further cut in the OCR given current spare capacity, "but that will likely be the end to easing".

And long time advocate of a lower OCR, Jarrod Kerr said the labour market is showing some signs of stabilising. "It’s early days, and it’s lagged data. I think we will see confidence lift with the cash rate firmly in stimulatory territory. I’m hearing more from investors and developers. They are nervous about the election next year, but admit interest rates are at levels that make a few things work. That’s what it’s all about."

Kerry Gupwell, chief executive of Boffa Miskell also favoured a further 25bp cut this week. "Things feel a little better so far in Q4 (from a very low base). There is a little more activity and positivity, but they still look hesitant and uneven across different sectors. I think businesses are still 'protecting' headcount rather than hiring. Unemployment rose again but may have peaked? Inflation is back in the band but at the top. Another 50bp so soon after October risks overcooking things and having to reverse later. A smaller step keeps easing moving, supports confidence and cashflow. Monetary policy can do a bit more; but in my view the real work still sits with government on planning reform, infrastructure delivery, and policy certainty," he said.