A leading economist believes people need to cool the jets in getting their hopes up about interest rate cuts.
That's because inflation is still a major problem, Cameron Bagrie believes.
The Reserve Bank of New Zealand (RBNZ) will provide an update on the official cash rate (OCR) on Wednesday but many experts expect it to be left at the current level of 5.5 percent.
RBNZ held interest rates for the fourth consecutive time in October at 5.5 percent - having lifted it by 525 basis points since the end of 2021 in a bid to tame skyrocketing inflation.
But inflation seems to be slowly easing in New Zealand, with the latest data from Stats NZ showing inflation had dropped to its lowest levels since December 2021 at 5.6 percent.
This has seen some experts believe cuts to the interest rates could be on the way early next year.
Milford Asset Management portfolio manager Mark Riggall told AM last week the landscape has changed over the last month with inflation slowly getting under control. He believed this was giving investors confidence, so questions turned to when a cut to interest rates could occur.
"The second bit is then, well hang on, if they're not hiking anymore, what's the next step and when's that going to happen? The next step will likely be a cut because we've already hiked so much," he said.
But Bagrie told AM that take could be premature with inflation "still a problem globally".
"We're a long way away from 2 percent but globally, in the United States and New Zealand, the big theme at the moment is the direction of travel for inflation is down, albeit slowly," he said.
"When the direction of travel is down, your monetary policy expectations shift and it shifts from expecting, well, maybe the official cash rate, interest rates don't need to be moving up too far and financial markets don't do stability very well."
Bagrie told AM host Ryan Bridge current expectations are the OCR could start dropping at the end of 2024 but he believes that is a "tad early".
"If they're not going up the general bias tends to be, the next move is going to be a cut and there's going to be general expectations or there's going to be different expectations over when we see the timing of the cut," he said.
"New Zealand's markets are saying we could see the OCR fall in the back half of 2024. My suspicion is that is a tad early. Inflation is coming down but, as I said, inflation is still a long way away from 2 percent and the target for the Reserve Bank is 2 percent."
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