RBNZ cuts New Zealand cash rate by 50bp, more than expected. A 25bp rate cut was widely expected.
- Cash rate target now 2.5%, from 3%.
- NZD/USD has been marked down on the larger than expected rate cut
Note that there is no press conference scheduled today.
Reserve Bank of New Zealand comment:
- the Monetary Policy Committee agreed to reduce the Official Cash Rate (OCR) to 2.5% - a 50 basis point reduction
- Inflation is currently around the top of our 1-3% target band but is expected to return to the 2% mid-point during the first half of 2026
- The Committee remains open to further cuts to the OCR as required for inflation to settle sustainably near the 2% target mid-point in the medium term.
More:
- Higher near-term inflation could prove to be more persistent
- Committee remains open to further reductions in the OCR as required for inflation to settle sustainably near the 2 percent target mid-point in the medium term
- With Sparecapacity in the economy, inflation is expected to return to around the 2percent target mid-point over the first half of 2026.
- Economic activity through the middle of 2025 was weak
- There are upside and downside risks to the inflation outlook in New Zealand.
RBNZ MINUTES:
- The case for reducing the OCR by 50 basis points emphasised prolonged spare capacity and the associated downside risk to medium-term activity and inflation.
- The Committee discussed the options of reducing the OCR by 25 basis points or by 50 basis points at this meeting.
- Financial conditions are influenced by the current level and expected future path of the OCR.
- The Committee has revised its assessment of current spare capacity only marginally in response to new GDP and activity data.
