New Zealand’s central bank cut the official cash rate by 25 basis points to 2.25%, the lowest since mid-2022, but signalled the easing cycle is effectively over as early signs of recovery emerge. The move matched expectations, yet the tone of the statement was more cautious than markets anticipated, prompting traders to sharply scale back bets on any further cuts.
The Reserve Bank of New Zealand said the board debated between holding rates or cutting again, and stressed that future moves will depend on how inflation and growth evolve. The meeting was the final one under Governor Christian Hawkesby before Anna Breman takes over in December.
The bank now projects the OCR to sit at 2.25% in early 2026 and rise to 2.65% by late 2027, a path that, while lower than previously forecast, effectively shuts the door on more easing. Markets responded swiftly: the New Zealand dollar rose 1% to a one-week high, and two-year swaps jumped as expectations for another cut fell from just over 50% to 22%.
The RBNZ has delivered 325 basis points of cuts since August 2024 to support an economy that slipped into recession last year and remains fragile. While activity remained weak through mid-2025, lower borrowing costs have begun to lift household spending. Inflation is seen drifting back toward the 2% midpoint of the target band by mid-2026.
Economists said the central bank’s stance mirrors the caution seen at the RBA and the U.S. Federal Reserve. The committee minutes showed five of six members opted for Wednesday’s cut, but placed weight on upside risks to both inflation and output despite the “significant excess capacity” still apparent in the economy.
Growth is expected to improve modestly to 0.4% in Q3 and 0.7% in Q4, but confidence, housing and external demand remain clear headwinds.
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