RBNZ cuts rates by 25bps as expected, signals scope for further easing

Investing.com-- The Reserve Bank of New Zealand (RBNZ) lowered its interest rates on Wednesday, as widely expected, as slowing domestic activity and spare capacity weighed on the growth outlook.

The central bank cut its official cash rate (OCR) by 25 basis points to 3.00%, following a hold in July.

The Monetary Policy Committee voted 4-2 for the quarter-point cut, with a minority favouring a larger 50 basis-point reduction.

Including Wednesday’s reduction, the RBNZ has lowered interest rates by a total of 250 basis points since August 2024.

The central bank said inflation is currently near the top of its 1-3% target band but is projected to ease toward 2% by mid-2026 due to significant spare capacity in the economy.

"If medium-term inflation pressures continue to ease in line with the Committee’s central projection, the Committee expects to lower the OCR further," the central bank said in a statement.

Governor Christian Hawkesby said the decision was aimed at supporting growth after the economy contracted in the June quarter, with household and business spending constrained by weaker employment, falling house prices, and higher costs for essentials.

The central bank projected a gradual recovery later in 2025 as lower borrowing costs feed through, but highlighted global trade tensions and U.S. tariff increases as headwinds.