He Central Bank of New Zealand On Wednesday it cut the benchmark interest rate to 5.25%, its first move to ease monetary policy since March 2020, and suggested further cuts in the future as inflation falls between its target of 1% and 3%.
The decision to cut rates by 25 basis points was in line with market quotes but beat most experts’ expectations, as 19 of 31 economists polled by Reuters predicted the Reserve Bank of New Zealand (RBNZ) would keep rates steady. I did from May 2023.
“The committee agreed to ease the level of monetary policy tightening by reducing the OCR,” the central bank said in its statement.
“Price behavior is consistent with the low inflation environment and the pace of easing will depend on the Committee’s confidence that inflation expectations are anchored around the 2 percent target,” he added.
Predictions of RBNZ Recommend at least three cuts by the middle of next year, with the spot rate at 4.9% in the fourth quarter of 2024 and 4.4% in the second quarter of 2025. Previously, it was not expected to start cutting rates until mid-2025. .
“The committee noted that the balance of risks has gradually shifted since the May fiscal policy statement,” the minutes of the meeting were published with its report.
“A variety of indicators suggest the economy is contracting faster than expected, with downside risks to output and employment highlighted in July still evident,” the minutes added.
The RBNZ, a global pioneer in withdrawing pandemic-era stimulus, has raised rates by 525 basis points from October 2021 to rein in inflation, in the most intense tightening cycle since the policy rate was introduced in 1999.
Annual inflation New Zealand It has fallen in recent months and is now at 3.3%, expected to return to the central bank’s target band in the third quarter of this year.
Rate hikes have weighed heavily on the economy, with growth weak in the first quarter and recent data indicating a more modest pace.
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