The Reserve Bank of New Zealand (RBNZ) has reduced the Official Cash Rate (OCR) by 50 basis points to 4.25% today. This decision follows a previous cut of 50 basis points, which brought the rate down to 4.75% in October.
“Annual consumer price inflation has declined and is now close to the midpoint of the Monetary Policy Committee’s 1 to 3 percent target band. Inflation expectations are also close to target, and core inflation is converging to the midpoint. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year,” RBNZ said in a statement.
Most economists had anticipated the reduction of 50 basis points, noting that this move aligns with the Reserve Bank’s communications from October as well as current forecasts and market expectations.
However, some analysts advocated for a more aggressive cut of 75 basis points, arguing that such drastic action might be necessary in light of the significant economic challenges facing New Zealand.
“Economic growth is expected to recover during 2025, as lower interest rates encourage investment and other spending. Employment growth is expected to remain weak until mid-2025, and, for some, financial stress will take time to ease,” the Reserve Bank said.