New Zealand Central Bank Cuts Key Rate By 25 Bps

(RTTNews) - The Reserve Bank of New Zealand reduced its benchmark rate by a quarter-point on Wednesday, to spur economic recovery.

The Monetary Policy Committee, chaired by Christian Hawkesby, voted 5-1 to cut the overnight cash rate by 25 basis points to 2.25 percent.

The bank has lowered the rate by 325 basis points since August 2024. With the latest reduction, the OCR hit the lowest since mid-2022.

At the meeting, the policymakers discussed the options of holding the OCR at 2.5 percent and lowering the OCR to 2.25 percent.

"The Committee noted that a reduction in the OCR would help to underpin consumer and business confidence and lean against the risk that the economy recovers more slowly than needed to meet the inflation objective," the bank said.

"Future moves in the OCR will depend on how the outlook for medium-term inflation and the economy evolves," the bank added.

Although inflation accelerated in September, it is expected to ease to around 2 percent by mid-2026. Moreover, risks to inflation outlook are balanced, policymakers noted.

Further, the committee observed that lower interest rates are encouraging household spending, and the labor market is stabilizing.

The economic recovery could be faster and stronger than expected if domestic demand proves more responsive to lower interest rates, they said.