NZ central bank cuts rates by 50bps, flags more easing to revive frail economy

WELLINGTON: New Zealand’s central bank cut its benchmark rate by 50 basis points to 3.75% on Wednesday and policymakers flagged further reductions in borrowing costs amid moderating inflation as they sought to revive a struggling economy.

The New Zealand dollar slipped while the 90-day bank bill futures rallied as markets priced in a 25-basis point cut in April, and more reductions by year-end.

“The economic outlook remains consistent with inflation remaining in the band over the medium term, giving the Committee confidence to continue lowering the OCR,” the Reserve Bank of New Zealand said in its accompanying policy statement.

The decision was in line with a Reuters poll where 32 of the 33 economists surveyed forecast the RBNZ will cut the cash rate for the fourth straight meeting, and by half a percentage point.

“If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025,” the RBNZ said.

Australia’s central bank cuts cash rate to 4.10%

The central bank signalled a lower cash rate trajectory in coming months compared with previous forecasts, but the reductions are expected to be in smaller 25-bps moves. It now projects that rates will fall to 3.45% by June, and the year-end rate is expected to be 3.10%, down from the November estimate of 3.2%.

“The main message from today’s Monetary Policy Statement is the lowering (again) of the Official Cash Rate track. The RBNZ are signalling more cuts, sooner,” said Kiwibank chief economist Jarrod Kerr.

The central bank has now cut rates by 175 basis points since August, with a slowdown in inflation giving policymakers leeway to extend their easing efforts in a much needed boost for an economy struggling to emerge from a deep recession.

The RBNZ said it is well placed to maintain price stability over the medium term and respond to future inflationary shocks, but added that global uncertainty over tariff policies pose some risks to the economy.

“The RBNZ’s aggressive 50-basis point cut to 3.75% shows its determination to revive the economy, despite inflation risks and global uncertainties like Donald Trump’s re-election as U.S. President,” Saxo Asia Pacific Senior Sales Trader Junvum Kim.

Several of the large banks in New Zealand including Westpac, ASB Bank, Kiwibank and Bank of New Zealand cut mortgage rates following the cash rate announcement.

Bill futures rallied as markets priced in a 93% chance of an easing in April and have rates near 3.0% by year-end, which is seen as the bottom of the cycle. The kiwi dollar slipped 0.3% to $0.5683 , having already lost 0.5% on Tuesday.