The Reserve Bank of New Zealand (RBNZ) cuts the Official Cash Rate (OCR) by 50 basis points, from 4.25% in November to 3.75% as of today.
“Annual consumer price inflation remains near the midpoint of the Monetary Policy Committee’s 1 to 3 percent target band. Firms’ inflation expectations are at target, and core inflation continues to fall towards the target midpoint. The economic outlook remains consistent with inflation remaining in the band over the medium term, giving the Committee confidence to continue lowering the OCR,” RBNZ said in its statement.
This afternoon, the Reserve Bank indicated that economic activity remains sluggish, “With spare productive capacity, domestic inflation pressures continue to ease. Price and wage-setting behaviours are adapting to a low-inflation environment. The price of imports has fallen, also contributing to lower headline inflation.”
RBNZ also expects economic growth to rebound in 2025.
“Lower interest rates will encourage spending, although elevated global economic uncertainty is expected to weigh on business investment decisions.”
“Higher prices for some of our key commodities and a lower exchange rate will increase export revenues. Employment growth is expected to pick up in the second half of the year as the domestic economy recovers.”
“Global economic growth is expected to remain subdued in the near term,” RBNZ added.
“Geopolitics, including uncertainty about trade barriers, is likely to weaken global growth. Global economic activity is also likely to remain fragile over the medium term given increasing geoeconomic fragmentation.”
Consumer price inflation in New Zealand is also anticipated to be “volatile” due to a weaker exchange rate and rising petrol prices.
“The net effect of future changes in trade policy on inflation in New Zealand is currently unclear. Nevertheless, the committee is well placed to maintain price stability over the medium term. Having consumer price inflation close to the middle of its target band puts the Committee in the best position to respond to future inflationary shocks.”
Meanwhile, Finance Minister Nicola Willis commented on today’s Reserve Bank announcement, suggesting that the economy is on a growth trajectory, providing optimism for increased jobs and opportunities for the public.
“The Government knows many families and businesses are doing it tough, but evidence is mounting that they can look forward to better times,” Willis said.
RBNZ’s next Monetary Policy Review announcement is scheduled for April 9.