In a decisive move to address the economic slowdown, New Zealand’s central bank has lowered interest rates by half a percentage point. The Reserve Bank of New Zealand (RBNZ) announced on Wednesday that it has reduced the Official Cash Rate (OCR) from 5.25% to 4.75%. This decision was in line with the expectations of 19 out of 23 economists surveyed by Bloomberg, while the remaining four had anticipated a smaller cut of a quarter-point. This marks the RBNZ’s second consecutive reduction, following a quarter-point cut initiated in August.
The RBNZ’s Monetary Policy Committee indicated that the current economic climate allows for further easing of monetary policy restrictions. They emphasized that any future adjustments to the OCR will be based on ongoing assessments of economic conditions.
New Zealand’s economy is currently facing significant challenges, including rising unemployment and declining house prices, which are attributed to a sustained period of high borrowing costs that has dampened consumer demand. Analysts note that inflation is decreasing rapidly, with some expressing concerns that it might fall below the RBNZ’s 2% target midpoint within the established 1-3% range.
Sharon Zollner, chief economist at ANZ Bank in Auckland, remarked, “The next move remains conditional on the data, as always, but there was nothing in today’s commentary to dissuade the market from anticipating another 50 basis-point cut in November as the most likely outcome. That seems entirely fair and is in line with our forecast.”
Following the announcement, the New Zealand dollar dipped by more than a quarter of a US cent, trading at 61.06 cents at 3:20 p.m. in Wellington. Meanwhile, stock markets reacted positively, with shares rising 1.6%, and bond yields saw a decline, with 10-year government securities dropping as much as 5 basis points to 4.26%.
It is important to note that this decision was part of a policy review, which did not include new economic forecasts or a press conference.
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