Reserve Bank of New Zealand surprises markets with outsized 50bps rate cut to 2.50%, lowest since 2022

[New Zealand economy and financial market growth concept, 3D rendering]
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The Reserve Bank of New Zealand (RBNZ) has surprised financial markets on Wednesday by slashing its official cash rate by 50 basis points ((bps)) to 2.50% at its October 2025 meeting, marking the lowest rate since July 2022.

The RBNZ has justified the larger-than-expected cut, stating it was necessary to restore confidence in the economic recovery, which has lost momentum in recent months.

Since August 2024, the central bank has aggressively reduced rates by a cumulative total of 300 bps, and with inflation remaining comfortably within the bank's 1%–3% target range, policymakers maintain room to ease policy further.

“The Committee reached consensus to reduce the official cash rate by 50 basis points to 2.5 percent,” the Reserve Bank of New Zealand said in its accompanying policy statement. “The Committee remains open to further reductions in the OCR as required for inflation to settle sustainably near the 2% target mid-point in the medium term.”

Markets are now nearly fully pricing in an additional 25 bps cut at the RBNZ's next meeting in November, with rates generally anticipated to fall to 2% by 2026.

New Zealand's benchmark S&P/NZX 50 index rose 0.3% to close at 13,568 on Wednesday, its highest closing level on record, after the Reserve Bank surprised markets with a larger-than-expected rate cut and signaled further reductions. The New Zealand dollar fell 1% to $0.574 on Wednesday, hitting its lowest level since April.

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