New Zealand cuts official cash rate by a further 50bps
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The news: The Reserve Bank of New Zealand (RBNZ) has agreed to cut the country's official cash rate (OCR) by 50 basis points to 4.25%.
The numbers: The RBNZ said that annual consumer price inflation has declined and is now close to the midpoint of its 1% to 3% target band.
The central bank reduced its OCR by 25 basis points to 5.25% in August, then by a further 50 basis points to 4.75% last month, having been kept at 5.5% since May 2023.
The context: The RBNZ said that inflation expectations are close to target and core inflation is converging to the midpoint. If economic conditions continue to evolve as projected, it expects to be able to lower the OCR further early next year.
The central bank noted that economic activity in New Zealand remains subdued and output continues to be below its potential.
However, excess productive capacity, consistent domestic price and wage setting behaviours, and the falling price of imports have helped ease inflation.
The RBNZ said that economic growth is expected to recover during 2025 as lower interest rates encourage investment and other spending, but employment growth is expected to remain weak until mid-2025.
The source: RBNZ media release
