RBNZ Reduces Interest Rates by 50 Basis Points to 4.75%

The Reserve Bank of New Zealand has reduced interest rates by 50 basis points, bringing the official cash rate down to 4.75% from 5.25%. This decision aligns with market expectations and reflects the bank’s ongoing efforts to stabilize inflation while supporting local economic growth.

The cut was driven by growing confidence among policymakers that inflation, as measured by the consumer price index, will fall within the bank’s target range of 1% to 3% by the September quarter, according to a statement from the central bank. However, it also indicated that any future rate adjustments would depend on economic performance, emphasizing that the current rate of 4.75% remains “still restrictive.”

The Reserve Bank acknowledged that New Zealand’s economy continues to show signs of weakness and anticipated a softening labor market in the months ahead. This marks the second rate cut of the year as part of an easing cycle initiated in response to declining inflation and slowing economic growth. The central bank had previously cut rates by 25 basis points in August, with indications of more potential reductions.

Nonetheless, the bank’s recent comments suggest that future rate cuts may be less certain, as it intends to assess the effects of its previous rate adjustments on the economy. Following the announcement, the New Zealand dollar declined, with the currency pair dropping nearly 0.5%.