The Reserve Bank of New Zealand's Monetary Policy Committee has cut the official cash rate by 25 basis points from 3.50 percent to 3.25 percent, in line with the consensus forecast. Officials have now lowered policy rates by a cumulative 225 basis points over their last six meetings after an extended period of restrictive policy settings.

This further easing follows the release of data showing headline inflation has now remained within the RBNZ's target range of 1.0 percent to 3.0 percent for three consecutive quarters. The unemployment rate remained at its highest level since 2020 in the three months to March.

In the statement accompanying today's decision, officials advised that they expect food & electricity prices to push up headline inflation in the near term but that they remain confident it will then fall back towards the mid-point of their target range over 2026. Officials also expect policy easing over recent months to support a recovery in domestic growth, despite noting concerns about the impact of global trade tensions.

Reflecting these factors, a majority of MPC members concluded that further policy easing was warranted today, though consideration was also given to keeping the rate on hold. Although officials provided little guidance about the likelihood of further easing in coming months, they consider that they are"well placed" to respond to developments as required.

Forecasters uniformly expect a 25 basis point rate cut to 3.5 percent for the official cash rate with a signal of more rate cuts ahead.

Meeting at roughly six week intervals, the Reserve Bank of New Zealand meets and decides whether to change or maintain New Zealand's Official Cash Rate. The RBNZ is known for its clarity regarding monetary policy intentions, thus the result is usually foreseen in advance. The decision aligns with the Reserve Bank of New Zealand's monetary policy to spur or slow economic growth or affect the exchange rate.

The RBNZ maintains an inflationary target range of 1 percent to 3 percent and will change rates to keep it within such a range, making rate decisions fairly predictable. Rate changes are significant nonetheless, affecting interest rates in consumer loans, mortgages, and bond rates. Increases or even expectations for rate increases tend to cause the New Zealand Dollar to appreciate, while rate decreases cause the currency to depreciate.

The RBNZ determines interest rate policy at it policy meetings. These meetings occur roughly every six weeks and are one of the most influential events for the markets. Market participants speculate about the possibility of an interest rate change. However, since the Bank is known for its clarity in setting policy, the result is usually built into the markets in advance. The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.

Frequency
Eight times a year.