By Lucy Craymer
WELLINGTON (Reuters) – New Zealand’s central bank cut the cash rate by 50 basis points to 4.25% on Wednesday, as annual inflation ran near the 2% midpoint of its target range and economic activity remained subdued.
The decision was in line with expectations, with 27 of the 30 economists in a Reuters poll forecasting the Reserve Bank of New Zealand (RBNZ) would cut the cash rate by 50 basis points. This follows a similar move in October.
“If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR (official cash rate) further early next year,” the statement said.
“The Committee agreed that a 50 basis point cut is consistent with their mandate of maintaining low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates and the exchange rate,” the minutes of the meeting said.
The RBNZ is now forecasting the cash rate to be at 3.8% in the second quarter of 2025 and at 3.6% in the fourth quarter of 2025, suggesting more cuts than had been expected in August.
The statement said domestic price and wage setting behaviour is becoming consistent with inflation remaining near the target midpoint and that the price of imports has fallen, also contributing to lower headline inflation.
It added 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.
(This story has been refiled to remove a duplicated quote and tweaks the headline)