New Zealand Central Bank Governor Adrian Orr on Friday raised the clear prospect of cutting rates by another 50 basis points by the end of the year, in open comments that set the tone for decisive easing. Monetary policy.
The Reserve Bank of New Zealand cut its benchmark rate by a quarter percent on Wednesday for the first time since March 2020, surprising some market players and signaling further cuts in the coming months as inflation nears its target. 1% to 3%.
In a speech to the Wellington Chamber of Commerce, he expressed confidence that New Zealand had returned to a low and stable inflation environment.
“There are two more opportunities between now and Christmas for two more cuts, and if everything goes well with the data and what we’re talking about, I’d like to offer that,” he said.
The central bank governor added that his preference was for further cuts to continue through 2025, backing economists’ expectations for further reductions in the year ahead.
The RBNZ’s own guidance puts the official cash rate at 3.85% from 5.25% by the end of 2025, while market prices are betting on 3.0% by then.
A Reuters flash poll released on Thursday showed most economists expect the central bank to cut rates by 50 basis points by the end of the year.
New Zealand joins a global monetary policy easing campaign, including the European Central Bank, the Bank of Canada and the Bank of England, as major central banks reverse their sharp hikes from 2022 to combat tougher inflation. The US Federal Reserve is expected to cut interest rates starting next month.
Lieutenant Governor Karen Silk told Reuters in an interview that her decision to support the cuts on Wednesday was driven by several data points.
We have high frequency indicators that are very weak and not just one. “Earlier there were mixed signals out there, but now everything points to weaker activity in the economy and weaker than we expected,” Silk said.
The RBNZ is forecasting a recession for New Zealand this year, as policymakers focus on stabilizing the economy amid weak domestic demand and a tough global growth environment.
All possible rate decisions are on the table for Wednesday, including a major cut, but with New Zealand’s political cycle at an inflection point, “there is still some uncertainty.” (Reporting by Lucy Cramer in Wellington Editing by Sri Navaratnam)
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