New Zealand’s central bank announced a larger-than-expected 50 basis point rate cut on Wednesday, lowering the official rate (OCR) to 2.50% and signaling further easing could follow to support a sluggish economy.
- The bank has now reduced the OCR by a total of 300 basis points since August 2024, taking advantage of inflation comfortably within its target range of 1-3%.
The Reserve Bank of New Zealand (RBNZ) said its monetary policy committee had reached consensus to cut rates and remained open to further cuts “if necessary for inflation to stabilize sustainably near the target midpoint of 2%”. The move reflects growing concerns that weak demand and growing job insecurity are blocking recovery efforts.
The move surprised most economists (15 out of 26 in a Reuters poll predicted a smaller cut of 25 basis points) and provoked a strong reaction from the markets. The New Zealand dollar fell, as did two-year swaps.
The RBNZ’s move suggests policymakers now see inflationary pressures fading faster than expected and are prioritizing growth risks.
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NZD/USD remains near the bottom of the session range, around 0.5744.
