Financial News: New Zealand Hints At More Interest Rate Cuts

New Zealand Hints At More Interest Rate Cuts

08/20/2025 - 03:43:00 (RTTNews)

(RTTNews) - The Reserve Bank of New Zealand reduced its key interest rate by 25 basis points to a three-year low and hinted at further easing on Wednesday.

The Monetary Policy Committee, governed by Christian Hawkesby, voted to lower the Official Cash Rate to 3 percent from 3.25 percent. The bank has reduced the rate by 250 basis points since August 2024.

RBNZ said the further data on the speed of New Zealand's economic recovery will influence the future path of the interest rate.

"If medium-term inflation pressures continue to ease as expected, there is scope to lower the OCR further," the bank said in a statement.

Policymakers lowered their projected floor for the cash rate for March 2026 to 2.55 percent from 2.85 percent estimated in May.

At the meeting, the committee discussed keeping the interest rate on hold at 3.25 percent, cutting the rate by 25 basis points and 50 basis points. Four members voted in favor of 25 basis points cut and 2 members called for 50 basis point reduction.

Although inflation remains around the top of the 1-3 percent target band, headline inflation is forecast to return to around the 2 percent target midpoint by middle of 2026 with spare capacity in the economy and declining domestic inflation pressure.

The economic performance in the second quarter was weaker than expected in May. Members expect growth to resume in the September quarter, consistent with a recovery in some economic indicators for July.

Policymakers said economic recovery will accelerate as the full effects of interest rate reductions flow through the economy.

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