The Reserve Bank of New Zealand's Monetary Policy Committee has reduced the official cash rate by 25 basis points to 3.00 percent, in line with the consensus forecast. Officials have lowered policy rates by a cumulative 250 basis points over their previous eight meetings after an extended period of restrictive policy settings.

In the statement accompanying today's decision, officials noted that price pressures are moderating and expressed confidence that inflation is likely to return to around the middle of their target range of 1 percent to 3 percent by mid-2026. Although they expect domestic growth will be supported by previous policy easing, they cautioned that global uncertainty and weaker house prices may slow the pace of economic recovery.

Reflecting this assessment, officials decided that that it was appropriate to cut policy rates again today. They also advised that if medium-term inflation pressures ease as they anticipate, they will likely cut the cash rate further in coming meetings.

The RBNZ held rates steady in July but officials said easing was coming soon if the economy developed as expected. The consensus now looks for a 25 bp rate cut as inflation pressures have continued to ease in line with the bank’s forecast.

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.