Reserve Bank Of New Zealand Cuts Rate By 25 Bps, Signals Further Easing
(RTTNews) - The Reserve Bank of New Zealand reduced its benchmark rate by a quarter-point, as expected on Wednesday, and hinted at further easing as recent increases in trade tariffs pose downside risks to economic outlook.
The Monetary Policy Committee, led by acting governor Christian Hawkesby, decided to cut the Official Cash Rate by 25 basis points to 3.50 percent, which was the lowest since October 2022. The committee observed that a 25 basis-point reduction would be consistent with the mandate of maintaining low and stable inflation.
"As the extent and effect of tariff policies become clearer, the Committee has scope to lower the OCR further as appropriate," the bank said.
"Future policy decisions will be determined by the outlook for inflationary pressure over the medium term," RBNZ added.
The bank noted that inflation remains near the mid-point of the 1 to 3 percent target range and economic activity evolved largely as expected since the February meeting.
Nonetheless, the recently announced trade tariffs create downside risks to the outlook for economic activity as well as inflation in New Zealand, the bank said.
Capital Economics economist Abhijit Surya said the Committee will probably continue to move in 25 bps increments going forward.
However, as downside risks to inflation start to eventuate over the coming months, there will be a compelling case for the central bank to cut rates further than most are predicting, the economist added.
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