The Reserve Bank of New Zealand delivered a widely anticipated 25 basis point rate cut this week, lowering the Official Cash Rate (OCR) to 3.25%—bringing the total reduction in the current easing cycle to 225 basis points.
In a note to clients, economists at Wells Fargo said the move reflects a mix of softening price and wage pressures and signs of stabilisation in the broader economy. The bank expects the RBNZ to continue easing, though in a measured fashion.
“We see it transitioning to a once-per-quarter rate cut pace,” the note said, with the next 25 basis point reductions pencilled in for August and November. That would bring the OCR to a cycle low of 2.75% by year-end.
Wells Fargo’s outlook suggests the RBNZ is entering a phase of cautious normalisation, balancing inflation risks with the need to support a still-fragile recovery.
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ICYMI:
- RBNZ assistant governor silk: China’s low domestic consumption is a key issue
- Reserve Bank of New Zealand Governor Hawkesby sees near term growth headwinds
- RBNZ Gov. Hawkesby says decision to hold a rate vote was a healthy sign
- NZD/USD bouncing after the expected RBNZ 25bp cash rate cut
- RBNZ cuts cash rate by 25bp vs. 25bp expected
This graph from the RBNZ, note its not yet updated for yesterday's cut.
