New Zealand slashes official cash rate by 50 basis points
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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 4.75%.
The numbers: The RBNZ said its monetary policy committee assessed that annual consumer price inflation is within its 1% to 3% inflation target range and converging on the 2% midpoint.
The central bank reduced its OCR by 25 basis points to 5.25% in August, having been kept at 5.5% since May 2023.
The context: The RBNZ said that economic activity in New Zealand is subdued, in part due to restrictive monetary policy. Business investment and consumer spending have been weak and employment conditions continue to soften, it said, while low productivity growth is also constraining activity.
The RBNZ noted that some exporters have benefited from improved export prices, however global economic growth remains below trend.
The central bank said the New Zealand economy is "now in a position of excess capacity", encouraging price- and wage-setting to adjust to a low-inflation economy.
It said the rate cut was appropriate to help "achieve and maintain low and stable inflation", while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate.
The source: Reserve Bank of New Zealand media release
